What are Assets? Meaning, Features, and More.

हिंदी में पढ़ें:

From natural person to artificial person, everyone has something over which he has legal rights, which are called assets in accounting like money, houses, land, machinery, vehicles, etc. Nowadays it plays a very important role in the existence of any person because ultimately everything is derived from assets, even if it is daily necessities. Assets also plays a very important role in completing daily tasks.

From the business point of view, assets are a very important organ of business because, without assets, the business cannot start. Any business needs assets from start to finish, whether the asset is owned by the business itself or by someone else. How long a business can run also depends on its assets and this plays a very important role in the valuation of any business.

What are Assets?

Assets means everything that is owned by someone and that has monetary value and is used to buy and gain assets, pay liabilities, etc. This includes money, land, buildings, machinery, intellectual property, etc. It is mainly divided into two parts one is fixed assets which means those assets which are used for more than one year and the other is current assets which are used for less than one year.

In business, assets move equal to liabilities due to which if liabilities increase then assets also increase and if liabilities decrease then assets also decrease.

In any business the assets are shown along with the liabilities in the balance sheet. If depreciation is applied to an asset, it is deducted from the asset to maintain its actual book value. Assets alone in any business cannot reflect the financial position of the business unless the liabilities of the business are known because assets and liabilities are interlinked that is why balance sheet is used to find out the financial position of any business.

Note: The actual value and book value of the asset may differ.

Features of Assets

Following are the features of the assets:

1. Resource:

An asset is a resource that is used to do something. By using assets, the business can carry out its daily work efficiently, for example by using computers administrative work can be done efficiently, by using machines production can be increased, etc.

2. Monetary Value:

An asset has a monetary value due to which it is traded in the market. It can be used to buy assets, make payments to creditors, etc. The monetary value of any asset depends on its nature. For example, if we talk about land, it has a price/value in the market at which it is traded.

3. Ownership:

Assets have ownership due to which it is owned by someone and those who own the assets enjoy ownership. There are many laws protecting the ownership of properties, these laws may vary from region to region. There are some properties that have to be registered like land, buildings, vehicles, patents, trademarks, etc.

4. Depreciation:

There are some assets whose value decreases over time, depreciation is charged on them to arrive at their correct book value. Depreciation of assets occurs due to time, use, wear and tear, technology, etc. Depreciation charged on an asset is shown in the profit and loss account and the depreciated value is deducted from the asset.

5. Tangible and Intangible:

Assets are tangible and intangible. Tangible assets mean those assets that can be seen and touched like buildings, land, machinery, vehicles, etc., and intangible assets mean those assets that cannot be seen and touched like patents, copyrights, trademarks, etc.

6. Fixed and Current:

The assets are fixed and current. Fixed assets mean those assets that have been used for more than one year such as buildings, land, vehicles, etc., and current assets mean those assets that have been used for less than one year Like cash, bank, debtor, etc.

7. Maintenance Expenses:

There are some assets that require maintenance so that they can be used smoothly, for which maintenance expenses have to be incurred. Assets that are not maintained even when required may wear out/expire/end prematurely. For example, maintenance of machinery, vehicles, etc. is necessary.

8. Appreciation:

The value of some assets increases over time such as land, stocks, investments etc. The reason for this happening is increase in demand, decrease in supply, increase in inflation, etc. These assets help increase business profits but can also lose value. It is used in the same way as depreciation is used.

Read Also:

• Classification of Assets
• What is Liability? Meaning, Features, and More.
• Classification of Liabilities

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