Asset

An asset is an economic resource. An entity, tangible or intangible, that can be owned and controlled to be of economic value. Elaboration of an asset is provided in the Balance Sheet of a firm. They are classified on the basis of their tangibility as:

Tangible Assets

Assets which have a physical identity can be touched or seen are called tangible assets. Examples of tangible assets include machinery, property, inventories and such.

Intangible Assets

These assets do not have a physical presence but can be owned and be accounted for by rights to their exercise. Examples of these assets are patents, trademarks, goodwill, etc.

Assets are further classified in terms of their liquidity as:

Current Assets

Current assets are liquid or can be made liquid in short term. These include cash and other assets that can be converted to cash in either a year or in an operating cycle. Examples include short-term investments, receivables, and cash equivalents and so on.

Fixed Assets

These are utilized for a longer to generate continuous profits. Furniture, machinery and long-term investments are some examples.

Liability

A liability is fundamentally a firm’s debt obligation. These can be understood as future obligations made for current benefits. These are classified in terms of their duration as:

Current Liabilities

These liabilities are expected to be repaid in a year or an operating cycle. Wages, Short-term bonds, and taxes are some examples of Current Liabilities.

Non-Current Liabilities

These are long term obligations or liabilities that are not liquidated with a year. Long term leases, long-term bonds are some examples.