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Tangible-Intangible Assets

Business and accounting define an asset as an economic resource owned by a company or other organization. Such an asset may be tangible or intangible and can be used for repayment of debts. The term also describes things of value that can readily be converted into cash. Cash itself is also thought of as an asset. The balance sheet lists a business’s assets along with their monetary values. Money and other valuables owned by the firm are included in this listing. The subclasses that make up the tangible assets include current and fixed assets. Inventory makes up part of the current assets while fixed assets include fixed buildings and equipment. Rights that offer you advantage in the market place are viewed as intangible assets. Goodwill, copyrights, trademarks, patents and computer programs fall in this category. Accounts receivable and stocks also make part of the intangible assets.


Assets present a probable benefit in the present or in future in the case of a profit oriented venture. A direct or indirect contribution to the future cash flow can be done by an asset either singly or by combining a number of them. Such an entity controls access to financial benefits for the business or individual.

Different events give rise to the entities right to control benefits. A transaction of such nature should already have occurred in order for the entity to qualify as an asset. Legal enforcement is however not necessary for the asset state to be declared. Other means can be used in controlling the entity’s use such that its benefit to the business is effectual.

Importantly, in accounting, an asset is not thought of as similar to ownership. Rather, an asset is the sum of equity and liability. An accounting equation shows this best in the form:

(assets = liabilities + stockholders equity)


This forms the mathematical structure that creates the balance sheet. Assets in the economic sense are thought of as any form of wealth held by an individual. The IFRS defines assets as resources controlled by an enterprise due to past activities. Future benefits are expected from such resources. In a large firm, asset tracking tools are used for monitoring, purchase, upgrade and licensing of assets. Disposal of physical and non-physical assets is also assigned to these tools. Certain divisions are required when listing accounts on a firm’s balance sheet. This will however be different according to each country.


Assets are defined as current if they are expected to be turned over in the operation cycle. Also in this category is cash, since it is used to cover short term expenses in the business. Cash and cash equivalents are the most liquid forms of assets and they include negotiable instruments such as money orders and bank drafts. Securities bought and held for future cash generation also satisfy criteria for the current asset class. Prepaid expenses such as insurance policies are recorded as assets even before consumptions. This is taken for granted since these are paid for in cash. Different forms of insurance are also viewed as assets.

Tags: bank, cash, Insurance, Legal, market, money

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