What is an Asset?

Summary

In this video, Thomas Harwood from The Accounting Student explains what an asset is, dividing them into two main types: fixed assets and current assets. Fixed assets, or non-current assets, are long-term resources used in a business, such as buildings, vehicles, and machinery, while current assets are short-term, like inventory, cash, and accounts receivable. The video invites viewers to think about examples of these assets, guiding them through tangible and intangible fixed assets, as well as current assets. The video concludes by encouraging engagement through likes, comments, and subscriptions.

Takeaways

• 😀 Assets are resources owned by a business that have economic value and can be measured.
• 😀 There are two main types of assets: fixed (non-current) assets and current assets.
• 😀 Fixed assets are bought with the intention of being held and used within the business for a long period of time (over a year).
• 😀 Fixed assets help a business generate revenue and are not intended to be sold quickly.
• 😀 Fixed assets can be divided into tangible (physical) and intangible (non-physical) categories.
• 😀 Examples of tangible fixed assets include premises, motor vehicles, computers, machinery, and fixtures.
• 😀 Intangible fixed assets include patents, copyrights, trademarks, and goodwill.
• 😀 Current assets are assets bought to be held for a short period of time (usually less than a year).
• 😀 Current assets are likely to be resold for a profit or converted into cash through day-to-day trading.
• 😀 Examples of current assets include stock (inventory), debtors (accounts receivable), cash, and prepayments.
• 😀 Engaging in activities like writing down examples of fixed and current assets helps reinforce the understanding of the concepts.

Q & A

What is the definition of an asset?

An asset is a resource owned by a business that has economic value and can be measured.

What are the two main types of assets?

The two main types of assets are fixed assets and current assets.

What are fixed assets and how are they used in a business?

Fixed assets, also known as non-current assets, are bought with the intention of being used within the business for a long period of time (more than a year) and are used to generate revenue.

Can you provide examples of fixed assets?

Examples of fixed assets include premises, motor vehicles, computers, machinery, and fixtures and fittings.

What are tangible fixed assets?

Tangible fixed assets are physical assets that you can touch, such as premises, vehicles, and machinery.

What are intangible fixed assets?

Intangible fixed assets are non-physical assets that cannot be touched, such as patents, copyrights, trademarks, and goodwill.

What are current assets and how are they different from fixed assets?

Current assets are assets that are expected to be held for a short period (less than a year) and are likely to be resold or converted into cash. They differ from fixed assets, which are held for longer periods and used to generate revenue over time.

Can you give examples of current assets?

Examples of current assets include stock or inventory, debtors (customers who owe money), cash in bank, cash in hand, and prepayments (expenses paid in advance).

Why are current assets important for a business?

Current assets are important because they are used in the day-to-day trading of a business and can be easily converted into cash to meet short-term financial obligations.

How can understanding assets help an accounting student?

Understanding assets helps an accounting student grasp how businesses manage and classify their resources, which is essential for preparing financial statements and making informed financial decisions.