What is an asset?

By Jean Folger AAA
A:

An asset is anything of value that can be converted into cash. Assets are owned by individuals, businesses and governments. Examples of assets include:

  • Cash and cash equivalents – certificates of deposit, checking and savings accounts, money market accounts, physical cash, Treasury bills;
  • Real property – land and any structure that is permanently attached to it;
  • Personal property – everything that you own that is not real property such as boats, collectibles, household furnishings, jewelry, vehicles;
  • Investments – annuities, bonds, cash value of life insurance policies, mutual funds, pensions, retirement plans (IRA, 401(k), 403(b), etc.,) stocks and other investments.

Assets are often grouped into two broad categories: liquid assets and illiquid assets. A liquid asset is one that can be converted into cash quickly with little to no effect on the price received. For example, stocks, money market instruments and government bonds are liquid assets. Illiquid assets, on the other hand, are assets that cannot be converted into cash quickly without substantial loss in value. Examples of illiquid assets include houses, antiques and other collectibles.

Your net worth is calculated by subtracting your liabilities from your assets. Essentially, your assets are everything you own, and your liabilities are everything you owe. A positive net worth indicates that your assets are greater than your liabilities; a negative net worth signifies that your liabilities exceed your assets.

RELATED FAQS

  1. How is accounting in the United States different from international accounting?

    Learn how accounting standards differ between the International Financial Reporting Standards, or IFRS, and generally accepted ...
  2. What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?

    Learn about the value at risk and how to calculate the value at risk of an investment portfolio using the variance-covariance, ...
  3. What is backtesting in Value at Risk (VaR)?

    Learn about the value at risk of a portfolio and how backtesting is used to measure the accuracy of value at risk calculations.
  4. How are transfer prices set?

    Read a brief overview about the complex world of transfer pricing, including the "arm's length" guidelines established by ...
RELATED TERMS
  1. Capital Expenditure (CAPEX)

    Funds used by a company to acquire or upgrade physical assets ...
  2. Accident Year Experience

    Premiums earned and losses incurred during a specific period ...
  3. Book Value Reduction

    Reducing the value at which an asset is carried on the books ...
  4. Inherent Risk

    The risk posed by an error or omission in a financial statement ...
  5. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
  6. Expanded Accounting Equation

    The expanded accounting equation is derived from the accounting ...

You May Also Like

Related Articles
  1. Budgeting

    Quickbooks vs. Quicken

  2. Stock Analysis

    What Are Costco’s Latest Earnings?

  3. Fundamental Analysis

    The Best 5 Online Accounting Systems ...

  4. Investing Basics

    How To Calculate Goodwill

  5. Entrepreneurship

    Building A Fortune: Jerry Jones And ...

Trading Center