As a small business owner, it’s important that you have an understanding of business assets. An asset is anything of value that your business owns. Assets are listed on your balance sheet and must be categorized. Everything that your business owns from your office equipment to your inventory is considered an asset.
Nolan Accounting can help you understand and manage your small business assets. We are located in Southeast Wisconsin and work with businesses in New Berlin, Waukesha, Muskego, Milwaukee, West Allis, and Greenfield to manage their day-to-day accounting and bookkeeping, as well as payroll and tax prep.
In this article, we’ll explain exactly what assets are, as well as the 6 categories.
Assets Explained
A small business asset is anything that your business owns that holds value. An asset can be tangible items, such as vehicles, equipment, furniture, inventory, etc. or it can be intangible, such as trademarks, copyrights, and patents.
An asset can be current or fixed. For example, cash accounts/accounts receivables are current assets, while your building would be fixed. It is important to note that while there are many types of assets, the overall definition is the same.
There are three primary ways to classify assets:
- Convertibility: how quickly it can be converted to cash
- Physical properties: tangible assets can be touched, while intangible assets cannot but are still valuable
- Operating/non-operating: operating assets are used to operate the business, while non-operating assets include investments, interest income, and land
6 Types of Small Business Assets
There are up to 6 types of assets that your business needs to track. When you record an asset on your balance sheet, it is important to make sure that it is categorized properly. For example, accounts receivables is not a long-term asset since it will be paid within a year. Below are the 6 types of small business assets:
Current
This describes how easily the asset can convert to cash. Current assets include:
- Cash/cash equivalent accounts
- Inventory
- Accounts receivable
If an asset can be converted to cash in less than 12 months, it is considered current.
Non-Current/Fixed
Non-current, or fixed, assets are typically big-ticket items that are held for more than 12 months. Typically, this includes the following:
- Land
- Buildings
- Vehicles
- Equipment/machinery
- Patents/copyrights
Any asset that cannot be quickly converted to cash is considered non-current, or fixed.
Tangible
A tangible asset is anything owned by a small business that has a physical presence. This includes things like:
- Cash
- Machinery/equipment
- Marketable securities
- Inventory
Intangible
Intangible assets do not have any physical properties. They cannot be touched. Intangible assets include:
- Copyrights
- Licenses
- Patents
- Goodwill
- Trademarks
An intangible asset can be valuable- it just cannot be touched.
Operating
An operating asset is used in the day-to-day operations of the business and includes:
- Inventory
- Accounts receivable
- Cash
- Patents/copyrights
Non-operating
A non-operating asset is anything of value that your small business owns that is not required for the day-to-day operations. This includes:
- Marketable securities
- Vacant land
- Short-term investments
These assets are still hold value- they are just not required on a daily basis.
Learn to Properly Track Your Assets
As a small business owner, it’s important to understand accounting, including tracking your assets. After all, if you don’t have assets, you don’t have a business.
If your business is located in Southeast Wisconsin, let Nolan Accounting help you with your day-to-day accounting and bookkeeping tasks, including tracking your assets. In addition, we can help you manage your payroll and help with quarterly and annual tax prep.