Lia Kopin-Green
November 27, 2022

What are Assets?

An asset is defined as something of value owned by an individual, organization or company. Simply put, assets are resources with economic value. There are many different types of business assets, including tangible goods such as real estate, vehicles or furniture or intangible assets like intellectual property. Moreover, business assets are generally divided into two categories on a company’s balance sheet: current assets and noncurrent assets.

The value of certain business assets may be determined by a licensed appraiser. Once assets are itemized and valued, they are typically listed on a balance sheet according to the order of liquidity and along with their historical costs.

Key Takeaways

  • In business law, an asset is defined as something of value owned by an individual, organization or company.
  • Assets may be tangible (real estate, vehicles, furniture and more) or intangible (intellectual property). 
  • Corporations are required to list all of their assets and liabilities in a balance sheet.

Current vs. Noncurrent Assets

A business's assets can be classified into two main categories: current assets and noncurrent assets. Proper classification of assets is key when it comes to running an organized, efficient business.

Current assets are considered a company’s short-term assets. In most cases, they are convertible to cash within a company’s fiscal year. These assets can be liquidated quickly and are generally used to fulfill a company’s everyday needs. On a balance sheet, current assets are listed at their current market price. A few common examples of current assets include cash and cash equivalents, prepaid expenses, current inventory, marketable securities and account receivables.

On the other hand, noncurrent assets are long-term. They cannot be converted to cash easily and have a useful life beyond one fiscal year. Thus, noncurrent assets are crucial to a company's long-term success. Certain investments, land, property, equipment and intellectual property such as patents and trademarks are typical forms of noncurrent assets. Noncurrent assets are usually listed below current assets and valued at cost without depreciation.

Tangible vs. Intangible Assets

Business assets can be both tangible and intangible. Tangible assets take on a physical form and often have a finite monetary value that can be determined by an appraiser. These assets, which are often used to pay back debts in bankruptcy law, include physical property such as commercial buildings, pieces of land or residential houses. 

Intangible assets are not physical in nature, but still hold significant value for an individual or business. Intellectual property is the most common type of intangible asset, and can appear in the form of a patent, trademark, or trade secret.

Bottom Line

When it comes to filling out a balance sheet, understanding the difference between current and noncurrent assets is tricky. In general, especially if you are a new small business owner, navigating the world of business law can be quite intimidating. Seek support from one of our experienced business law attorneys today.

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