Accounting Basics: Assets
Assets are things owned by a company, a country or an individual which hold some monetary value. Assets can be further categorised into two types: non-current assets (fixed assets) and current assets.
Non-current assets are normally acquired for long-term (more than a year) purposes to provide assistance in operations. For example the premises or office space, the machinery or any other equipment.
Current assets are short-term assets which are supposed to be used within a year. Examples are cash, inventory, and the debtors (accounts receivable).
Cash flow and profit
An asset helps to generate any cash flow or profits whether it’s new machinery for a factory or a laptop for an individual. Assets are a mandatory part of a balance sheet as they show how much a business owns. When a company acquires an asset, its value increases, and if it loses an asset the value of the company decreases.