Assets Are: Definition, Types, Examples and Purpose

Note that business is not just capital. After all, an established company should have everything ready. Employees and production facilities or business are needed, starting with initial capital. To fulfill all that, an entrepreneur must have sufficient funds. Without money, how can we build and grow our business the way it should be? 

In a company, any property or assets can be referred to as assets. Unfortunately, many business owners are unable to maintain their assets and their businesses face many obstacles, suffer losses and even go bankrupt. Therefore, you need to know what assets are and how important these assets are for your business. The article below will explain about assets in depth!

Definition of Assets

Before we collect assets and understand what assets are, it's good for us to know in advance what is meant by assets. You need to know this understanding to avoid misunderstandings and misunderstandings that you might be wrong in assessing your assets later.

Asset is a term that is interpreted by many subjects with many definitions. The first definition of the Big Indonesian Dictionary (KBBI) states that assets are wealth in the form of money or other material objects. On the other hand Wikipedia states that assets are a normal debit balance or economic resources that will provide a future business advantage. 

Assets have characteristics that set them apart from other financial statement components. In this way, assets can be identified by observing their characteristics. Such as financial interest, ownership and control of the company in the future arising from past transactions and events.

Types of Assets and Examples

Current assets

Current assets are the most liquid assets. This means that these assets are the easiest to cash out. Liquid assets have short sales and profit cycles. In general, the current asset turnover period is one year or the company's normal cycle. 

Due to the fast turnover, the current asset profits also run out quickly, but when they dry up they are replaced by other assets or assets. This situation continued until the end of the term of office. Examples of liquid assets include cash, bank balances and short-term securities.

Capital Assets

Long-term assets are very broad, and long-term assets are assets that have a usefulness of more than one year, and of course longer than liquid assets too. Long-term assets can be categorized into three categories:

Fixed assets

These are assets that can be seen in a physical form or form. These fixed assets are used by companies in their production activities for both goods and services. The company can sell the asset when the time or age of the asset itself is exhausted or damaged. Examples of property, plant and equipment: land, buildings, machines, vehicles, etc.

Intangible Assets

Apart from fixed assets, intangible assets are also classified as non-current assets. Intangible assets are assets that cannot be seen or seen physically but have value and use for the business. Examples of intangible assets include goodwill, patents, copyrights, building rights and leases. 

Long term investment

Another type of financial asset is a long-term investment. As the name suggests, these long-term investments consist of assets that are not liquidated within one year. Usually someone invests long term to get more profit.

Long-term investments are not used to meet or support basic needs. Examples of long-term investments include stocks, bonds, securities, special funds and business sites.

Asset Management Objectives

Increase asset security

A company has many assets that cannot be managed by an individual. Wealth management can reduce the potential for asset loss and business/company damage. Therefore, having an asset management team will help you better protect your assets and store them properly and safely.

Managing Risk

Wealth management is always related to risk management. So, where asset management cannot quantify the threats present in business assets, risk management complements it. Therefore, risk management plays a role in helping companies manage asset uncertainty that may arise in the future. 

Received Assets

The first benefit of wealth management is the ability to maintain a stable asset value. All company assets are subject to depreciation risk in the event of damage or loss. Asset management allows the company's asset value to remain high even in adverse environments.

Monitor Asset Depreciation

Assets may be impaired. When an asset is depreciated, the value of the asset decreases. Asset management is very important here because you can easily find the depreciation of your assets. Impairment in asset value is reported in the form of a report.

Avoid Buying Extra Assets

A further benefit of asset management is that it enables the asset management team to manage the purchase of business assets and avoid over-purchasing of assets. Thus, businesses can budget for asset purchases and save money at the same time by looking at their asset records to determine their top priorities.

Facilitate Budgeting

Good asset management makes it easier for companies, especially the finance department, to prepare their budgets. This allows companies to find assets that still need maintenance or renewal, to assets that cannot be renewed at all.

Asset Nature

We must Know what properties are owned by an asset in general. Assets have three main characteristics: resources, economic value, and ownership.

Assets of course are resources that can be used in the future. And of course, assets can be bought and sold, so they also have economic value. Assets may also represent personal wealth that can be converted into cash or other forms of wealth.

This is an explanation of assets for you. An understanding of assets is a basic science that you must learn before running a business, so take the time to understand how it works. Enjoy learning to manage a business!