Assets – What are assets?

Definition: Any item of value owned by an individual or corporation which could be converted to cash.

Assets which are expected to be used up and replaced within a year are referred to as Current or Short Term Assets. These would be your stock, bank and cash balance and debtors, amounts owed to the business from its customers.

Assets used within your business and not acquired for the purposes of resale are referred to as Fixed Assets. These would cover land and buildings, plant & machinery, fixtures and fittings and motor vehicles.

Assets = Liabilities + Owners' Equity

Assets, liabilities and owners' equity are the three components that make up a company's balance sheet, and it is this balance sheet that gives you the little snap shot of how secure, or insecure the company is financially.

Every transaction of a company whether it is money coming in or going out should be recorded, and it is these recordings that make up what your assets, liabilities and owners' equity are.

Generally on a balance sheet assets get recorded on the top or the left side; liabilities and owners' equity are recorded on the bottom or the right side of the balance sheet.