Updated on March 3, 2023
Any resource that can be sold or converted into something of monetary value is called an asset. In business parlance, an asset is controlled or owned by the company which can sell it today or at a future date for some monetary value. Assets can be physical items like plant, machinery, equipment or intangible like Intellectual Property, trademark or patents. For individuals, money in Bank account, ETFs, MFs, stocks, furniture, real estate are all examples of Assets.
Key features of Assets
Some of the key features of assets are:
a) Economic value – only that resource or product which has some economic value today and in future is termed as an asset. It should either be convertible to cash or provide reasonable monetary value by renting, leasing etc.
b) Ownership – the company must own or control the resource for it to realise its monetary value.
c) Depreciation – it signifies a reduction in value of an asset over time due to age, obsolecence, wear and tear etc.
d) Scrap value – at the end of its life, a physical asset when no longer of much use, can still be sold for some scrap value.