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Accounting Terms > Asset

Asset – An asset in accounting is anything that is owned by a company that later can be converted to cash, and cash itself is also considered an asset. Assets can be both tangible, and intangible.

Examples of intangible asset that could be on a firm’s balance sheet, would be copyrights, goodwill, trademarks, or patients. Examples of tangible assets that would be seen in the financial statements are land, buildings, equipment, inventory, cash, and cash equivalents.

Assets are considered economic resources, which can produce value and supply a company positive financial results some given time in the future.  Assets are recorded on a company’s balance sheet, and do not have to actually be in a firms possession.

An example of an asset that is not in a company’s possession that should be recorded on the balance sheet, would be accounts receivable. In this instance, a firm would have shipped a product to another entity on credit, and it is expected to collect on that invoice at some date in the future.

A company can use one asset to acquire another asset, or it can utilize a liability. If a company acquires supplies that it will use to produce a product, and will pay for them on a later date, those assets where obtained using a liability. If on the other hand, they paid cash for them, those assets were acquired using an asset.