Definition: An asset is a resource that owned or controlled by a company and will provide a benefit in current and future periods for the business. In other words, it’s something that a company owns or controls and can use to generate profits today and in the future.
What Does Asset Mean?
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The two important things to remember about this definition are that an asset is owned or controlled by a company and it can be used to benefit future accounting periods. Not all assets are owned by the company that reports them on their balance sheet. For example, a leased vehicle is not technically owned by the lessee, but it still reports the vehicle as an asset. Likewise, the company doesn’t necessarily have to benefit future periods, but it has to have to ability to benefit them. Cash may only benefit the company in the current period because it is received and spent in the current period. However, cash can be saved and spent in future periods.
Example
The asset account has a debit balance and is reported on the balance sheet in several categories. The main three categories include current, long-term, and intangible.
Current assets are reported first and include resources that can be used in the current year like cash, accounts receivable, and inventory.
Long-term assets include resources like vehicles, buildings, and other things that cannot be consumed in one period. In other words, they benefit the company in both the current and future periods.
Intangible assets are typically presented last in the assets section of the balance sheet because they are unlike current and long-term assets. Intangible resources; like contracts, patents, and trademarks; are not physical in nature and usually have a set expiration date.
As you can see, assets take many different forms including physical and intangible forms and come in many different sizes from large buildings to desktop computers.
