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 are assets in which they can easily be turned into cash or they expire within 1 year.
Account | In relation to a lemonade stand... |
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Cash | Literally cash. Can be physical or in the bank. |
Accounts Receivable | Johnny promises to pay you back $10 in a week for his lemonade. |
Inventory | Lemons that'll be turned into lemonade. |
Supplies | Pitcher 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 are used in business operations longer than 1 year.
Account | In relation to a lemonade stand... |
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Property | The plot of land that you run your lemonade stand on. |
Plant | A massive warehouse that you use to mass-produce your lemonade. |
Equipment | A lemon-squeezer used to create lemonade. |
Within Long-Term Assets, there's a sub-category...
Intangible assets are assets that you cannot physically touch, however they still provide economic benefit to your company.
Account | GBD Fits Description |
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Copyright | You create a custom design for your lemonade stand merch. You file that design for copyright. |
Trademark | You've filed for trademark on your lemonade stand name and logo so no other companies can copy it. |
Patent | You've patented your special lemonade concoction that improves health benefits. |
Contra assets are accounts that decrease your assets.
Account | In relation to a lemonade stand... |
---|---|
Accumulated Depreciation | You've been using your lemon-squeezer for 3 years now, and in-turn it has some wear-and-tear. |