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Assets

Assets, in essence, are...

Assets are anything that provide economic value to a firm.

Assets covers a lot of aspects of a business that provide economic value, so it's a little bit easier to segment them down into the following 3 categories:

  • Current Assets
  • Long-Term Assets
  • Contra Assets

Current Assets

Current assets are assets in which they can easily be turned into cash or they expire within 1 year.

AccountIn relation to a lemonade stand...
CashLiterally cash. Can be physical or in the bank.
Accounts ReceivableJohnny promises to pay you back $10 in a week for his lemonade.
InventoryLemons that'll be turned into lemonade.
SuppliesPitcher to pour the lemonade.

Don't get Supplies vs. Inventory twisted!

Supplies help run the daily operations of the business.

...vs...

Inventory is used to create the end-product that's eventually sold to customers.

Long-Term Assets

Long term assets are used in business operations longer than 1 year.

AccountIn relation to a lemonade stand...
PropertyThe plot of land that you run your lemonade stand on.
PlantA massive warehouse that you use to mass-produce your lemonade.
EquipmentA lemon-squeezer used to create lemonade.

Within Long-Term Assets, there's a sub-category...

Intangible Assets

Intangible assets are assets that you cannot physically touch, however they still provide economic benefit to your company.

AccountGBD Fits Description
CopyrightYou create a custom design for your lemonade stand merch. You file that design for copyright.
TrademarkYou've filed for trademark on your lemonade stand name and logo so no other companies can copy it.
PatentYou've patented your special lemonade concoction that improves health benefits.

Contra Assets

Contra assets are accounts that decrease your assets.

AccountIn relation to a lemonade stand...
Accumulated DepreciationYou've been using your lemon-squeezer for 3 years now, and in-turn it has some wear-and-tear.