What is an Asset: Definition, Properties and Types

Assets are valuable assets owned by individuals or business entities. Assets are usually very useful in the business world. Therefore, assets generally have economic value, exchange value, and commercial value.

From the point of view of accounting methods, assets can also be described as the sum of liabilities and equity. Liability is a responsibility like debts and dependents. While equity is income.

Definition of Assets According to Experts

Understanding assets is one of the most important concepts in accounting. In addition to the general definition, here are some references according to experts that are used as a source of information to find out the true meaning of an asset:

• Hidayat conveyed that the notion of assets is goods that are legally divided into movable and immovable objects as well as tangible and intangible
• Munawir defines an asset as a resource or facility with economic value that has a use as a support in measuring the acquisition price or fair value of a company
• PP RI No. 24 of 2005 states that the notion of assets is categorized into current assets (current assets) and non-current assets (non-current assets)

Nature and Characteristics of Assets

Just like other accounting components, assets are something that has certain properties and characteristics. This is of course very useful when we want to easily identify what is meant by an asset. As for a number of properties and characteristics of assets, namely:

1. Is an asset resulting from events or transactions carried out in the past. For example, property purchased as a form of investment.
2. Can be controlled and controlled by the owner, either individual or corporate body.
3. Have economic benefits that can be obtained for the future.

Asset Types

Assets are wealth that can be classified into several categories. Starting from the type of conversion, its use, and the form of the asset. The categories are then subdivided into asset examples. Here are detailed explanation points about various assets that you should know about:

Assets by Nature of Conversion

Convertibility or the nature of asset conversion is the level of difficulty in changing one form or form of an asset to another. The first asset classification is divided into two categories, namely:

• Fixed assets are something that can easily be converted into cash or cash equivalents. Other names for these assets are liquid assets and current assets. While examples are cash, stocks, short-term deposits, and other securities
• The definition of fixed assets is something that is more difficult to convert into cash or other equivalent assets. Examples in this category are often called non-current, long-term, or hard assets. For example: land, buildings, machinery, and equipment

Assets by Usage

In this second asset classification, category breakdown is done by looking at the usefulness or purpose of having assets for an individual or company. Assets are divided into two categories, namely:

• Operational assets are property needed in the company's operational activities in order to generate income from business activities. Examples include cash, inventories, buildings, equipment, machinery, patents, and so on
• Non-operating assets are wealth that is not used in daily business activities, but is still a source of income. For example: short-term investments, vacant land, securities, and interest income

Assets based on Physical Existence

At this point, assets are also divided into two categories, namely tangible and intangible. The full explanation of both is:

• Tangible assets are assets whose existence can be seen by the naked eye. Not only that, in this category assets are something that can be touched physically. Some examples are land, buildings, machinery, securities, supplies of materials, office equipment, and others
• Intangible assets are items that do not have a physical existence. For example, rights to patents, trademarks, copyrights, business licenses, and other forms of agreements that are usually made between parties who have an interest

So, that's the discussion about the definition and types of assets. In short, an asset is something that needs to be managed properly. These efforts are made to maintain ownership of the company's assets in the long term.