What is Assets?

Assets are everything of value your business owns or controls, recorded on the balance sheet. They are typically grouped by how quickly they can be turned into cash.

Current assets

Expected to be used or converted to cash within a year:

• Cash and bank accounts
• Accounts receivable
• Inventory
• Prepaid expenses

Fixed and long-term assets

Used in the business for more than a year:

• Equipment, vehicles and furniture
• Buildings and land
• Leasehold improvements
• Intangible assets such as purchased software licenses or goodwill

Fixed assets are generally recorded at cost and depreciated over time, as the IRS explains in Publication 946. Their book value is cost minus accumulated depreciation.

The accounting equation

Assets always equal liabilities plus owner's equity. Every transaction keeps that equation in balance, which is why the balance sheet balances.

Common mistakes

• Expensing equipment that should be capitalized, or capitalizing small items that should be expensed under your threshold
• Leaving sold or scrapped assets on the books
• Recording personal assets in the business

See our guides to the fixed asset register and how to read a balance sheet.

Related terms

• Accounts Receivable: Accounts receivable is money customers owe your business for goods or services already delivered.
• Liabilities: Liabilities are amounts a business owes to others, such as suppliers, lenders, employees and tax authorities.
• Owner's Equity: Owner's equity is the owners' stake in the business: assets minus liabilities.
• Prepaid Expenses: Prepaid expenses are payments made in advance for goods or services the business will receive in future periods.

Browse more definitions in the small business glossary.