What Are Assets? Types, Characteristics, and Examples

A company’s assets help with accounting and financial planning. So understanding and managing assets plays is critical in staying profitable and driving long-term growth.

Main takeaways from this article:

• Assets are items of value that individuals or entities can convert into cash at a future date or use to generate business.
• Asset categories include fixed assets (non-current assets), tangible assets, intangible assets, operating assets, and non-operating assets.
• RedBeam provides cloud-based fixed asset tracking software for fixed, tangible assets.

What Is an Asset?

Assets are items of value which include current assets such as cash and cash equivalents, fixed assets such as furniture and equipment, financial assets such as stocks and bonds, and intangible assets such as patents and copyrights. Business can further group assets into how they are used related to core operations or those used for other, non-operating activities. 

Assets appear on accounting balance sheets, representing debt an individual or company owes. Together with equity, assets and liabilities provide a snapshot of current financial health.  The world of business assets is vast and varied.

Current Assets

Current assets, also liquid assets, are those that can be readily converted into cash within a year or the operating cycle of your business, whichever is longer. They are vital maintaining financial liquidity.

Examples: Cash on hand, inventory, accounts receivable (money owed by customers), money market funds (treasury bills, notes, etc.)

Fixed (Non-Current) Assets

A fixed asset is a long-term investment that is not easily converted into cash or cash equivalents. It generally has a lifespan exceeding one year and contributes to a company's ability to produce goods and services over a long period of time.

Examples: Office furniture, desks, computers, laptops, buildings, etc.

Tangible Assets

Tangible assets have a physical presence and can be readily seen and touched. They encompass all the physical assets a company owns or controls, are directly involved in its day-to-day operations, and represent a significant portion of its overall value. Examples are all the assets listed under current and fixed assets.

Intangible Assets

While you can't hold them in your hand, intangible assets hold immense value for a business. These non-physical assets contribute to a company's competitive edge and future earning potential and are often the result of intellectual property development and marketing efforts. 

Examples: Trademarks, copyrights (excluding software), customer lists

Financial Assets

These represent a company's investments in other entities. They allow the company to generate additional income or gain exposure to future growth opportunities. Management of financial assets is crucial for long-term financial health.

Examples: Stocks, bonds, mutual funds, etc.

Operating Assets

Operating assets encompass all the resources directly involved in a company's tangible and intangible core operations. They're the tools and resources that keep the business running smoothly and directly contribute to a company's ability to deliver its products or services.

Examples: Production equipment, manufacturing facilities, inventory management systems

Non-operating Assets

Non-operating assets consist of resources you own but don't require for running your operations. They represent assets you could convert into cash that you don't necessarily use daily.

Examples: unused property, spare equipment, stocks, bonds, patents for products you don't currently produce.

How To Classify Your Assets

Asset classification breaks down into a three-step process: categorize, determine value, and revise periodically:

1. Identify and Categorize Assets

Start by identifying what assets you have so you can categorize where they should go on your balance sheet. Accountants classify assets based on three main criteria:

• Convertibility, the classification based on how quickly an asset can be converted into cash separates current from non-current assets. 
• Physical form: Tangible vs. intangible assets
• Usage in operations, separates operating vs. non-operating assets

Note that usage can subdivide the other two asset categories. For example, you may have both operating and non-operating assets that fall under current assets. Balance sheets normally list operating assets before non-operating assets.

Consider using dedicated asset management software to inventory  and categorize your assets. This makes it easy for you to track your assets digitally, update your asset lists, filter assets based on category, and export asset data for further analysis. RedBeam platforms manage tangible assets, both fixed and consumable assets to gain visibility and increase efficiency in operations. 

2. Determine Asset Value Based on Classification

After categorizing your assets, the next step is to assign value based on their classification:

• Current assets can be valued at current market value or cost. 
• Non-current tangible assets also can also be valued at current market value or cost, but this may take some research because the value of tangible assets may change as they age. You may need to consider factors such as original purchase price, depreciation or potential appreciation, and variables affecting the asset's lifespan or "useful life", such as usage intensity, maintenance practices, or technological advancements that may render the asset obsolete. RedBeam reporting offer built-in straight line depreciation calculations. 
• Intangible assets are valued based on estimates of potential value. For example, estimated asset value may be based on the market for similar assets, the cost of replacing the asset, the income the asset could be expected to generate, or royalties the asset might be expected to earn.
• Financial assets such as stocks and bonds are valued by estimating present value of projected cash flows adjusted for risk, determined using a technique called discounted cash flow analysis (DCF).

3. Review and Reclassify Assets as Needed

Developments that call for review of asset classification include scenarios such as:

• You turn a non-current asset into a current asset, such as selling a piece of land that was previously classified as property, plant, and equipment (PP&E)
• You change an asset's intended use, such as beginning to operate a piece of equipment that was previously unused in storage
• An asset's value changes due to market conditions, depreciation, or performance changes
• Your asset management compliance requirements change
• You notice a mistake or discrepancy in your previous asset classification

Consider conducting periodic asset classification reviews, with high-value assets reviewed more frequently.

Manage Your Assets with RedBeam

Classifying your current, noncurrent, intangible, financial, operating, and non-operating assets accurately gives you clearer insight into the value of your company. This improves your ability to conduct financial planning, attract investors, and achieve compliance.

RedBeam's cloud-based fixed asset management software makes it easier for you to manage your tangible assets by leveraging automation via radio frequency identification (RFID), in which asset location is can be visible with zero manual intervention.

This provides you with a digital asset database you can access from any location, view immediately, analyze for insights, and use to manage your assets efficiently. You can instantly see your assets' value, predict inventory and maintenance needs, and make data-driven business decisions.

With a 30-day free trial, you can get a hands-on feel for our software's capabilities and see how it helps you always gain visibility into your assets.