What are assets?

Assets, in accounting,  are values ​​that indicate what assets and rights  a company has  .

These amounts are shown on the Balance Sheet, along with Liabilities and Equity, which together result in the company’s total Assets.

It is also possible to consider that assets are convertible into monetary means, with the sale of company machinery or vehicles, for example.

The representation of assets on the balance sheet is divided between those assets that are convertible more quickly and those that take longer, which are current and non-current assets, respectively.

What are current assets?

Current assets represent those in which it is possible to convert them into monetary means in a short time, that is, they have higher degrees of liquidity.

The liquidity of this asset is considered within the accounting period of the company, before the end of the fiscal year, for example, within a quarter or a year. Therefore, this type of asset is known as  realizable in the short term  .

Examples of current assets

  • Cash and cash equivalents (cash on hand or deposited in a bank);
  • Inventories (raw materials, products in production, finished products, goods);
  • Debts receivable (trade accounts receivable, accounts receivable from short-term customers);
  • Taxes to be recovered (short term);
  • Short-term financial investments).

What are non-current assets?

Non-current assets are those that will remain in the company for a period beyond the fiscal year, due to its lower liquidity.

These types of assets are also known as  achievable in  the long term  , which are considered some of the same current asset accounts, but in the long term. In addition, the so-called permanent assets are included in current accounts.

Permanent assets

Another classification of assets is that of permanent assets, which receive this nomenclature for being used directly in the activities of the company.

These assets have some classifications, such as fixed assets and depreciation, investment assets, and deferral assets.

Fixed assets and depreciation

Physical assets of the company, such as machines or vehicles, and also assets considered “intangible”, such as  software  or patents.

For these assets, the “wear and tear” that they accumulate over time must be accounted for, through the Depreciation account, which reduces the values ​​of these assets.

Investments

Investments are assets that the company acquires when it invests in the participation of activities of another company or company, as well as assets and rights that are not intended for the main activity.

Postponements

A deferral is recorded on the balance sheet as an expense that will not be included in the results until the end of the accounting period and therefore a longer recognition must be made.

Differences between assets and liabilities.

In the composition of the Balance Sheet, Assets appear as assets and rights of the company, but also as Liabilities, which make up the obligations, or simply, the debts with third parties.

Liabilities can be seen as giving rise to new assets when the company seeks capital from third parties, as is the case when debts are incurred with suppliers, and at the same time these values ​​appear in inventory assets.

The difference between the total value of Assets and Liabilities, results in the Shareholders’ Equity, which originate from the company’s “own” values, such as those applied by partners or shareholders.