As an individual, you have assets: a car, perhaps a house, a computer, a bank account, etc. The categories might be different, but businesses have assets, too. In fact, you might have business assets you aren’t aware of! Your business assets are your business resources. Anything you require to successfully run your business is an asset. It’s important to know the difference between types of business assets so you can accurately report them. Here are different ways to categorize your business assets:
These are your company’s physical property, such as your building, vehicles, equipment, etc. Tangible business assets are necessary for your company to conduct business, are used on a daily basis, and depreciate in value over time. Most often, they are considered liquid assets because they are easy to convert into cash. Tangible assets are listed on your Balance Sheet.
Just because an asset doesn’t have a physical form doesn’t make it any less valuable. Things like industry knowledge, length of time in business, credibility, and reputation are all extremely valuable business assets. They aren’t listed on your Balance Sheet, but without them it can be hard to run a profitable business.
Assets in this category technically fall under Intangible Assets as well, but are specific enough to be identified on their own. Your business’ intellectual property encompasses your brand and creative property. Things like your logo, tagline, and trademark are part of your intellectual property. Any patents, inventions, formulas, or processes integral to your company also fit here.
As the name implies, these are assets immediately at your disposal. This category overlaps with Tangible Assets. Additional examples of current assets are your company’s cash, accounts receivable, and any product inventory you may have. They are liquid assets since they can quickly and easily be converted into cash (if they aren’t already in that form).
If you plan on owning something more than a year, it’s considered a long-term business asset. This category overlaps with tangible and intangible assets, as well as your intellectual property. Long-term assets include equipment, vehicles, buildings, and even furniture. Patents, copyrights, and trademarks are examples of intangible assets that are also long-term assets.
Most of your business assets should be listed on your Balance Sheet. This document reflects all your company’s assets and liabilities: your assets being resources that add value, and your liabilities being financial obligations. Altogether, the Balance Sheet reflects how much your company would be worth once all your obligations are settled. Balance Sheet categories include:
- Cash and cash equivalents
- Accounts receivable
- Prepaid expenses
- Property, plant, and equipment
- Investment property
- Intangible assets
- Financial assets
- Investments (when accounted for using the equity method)
- Biological assets
Your business assets become extremely important if you decide to sell your business. Taxation on the sale of a business can be hefty, but if you strategize it right you will come out on top. For more information about how to track your business assets on a Balance Sheet or how to go about the process of selling a business, contact Cascade Business Support today!