The two main types of assets are current assets and non-current assets. These classifications are used to aggregate assets into different blocks on the balance sheet, so that one can discern the relative liquidity of the assets of an organization.
Current assets are expected to be consumed within one year, and commonly include the following line items:
- Cash and cash equivalents
- Marketable securities
- Prepaid expenses
- Accounts receivable
- Inventory
Non-current asset are also known as long-term asset, and are expected to continue to be productive for a business for more than one year. The line items usually included in this classification are:
- Tangible fixed asset
- Intangible fixed asset
- Goodwill
The classifications used to define asset change when viewed from an investment perspective. In this situation, there are growth assets and defensive asset. These types are used to differentiate between the manner in which investment income is generated from different types of assets.
Growth asset generate income for the holder from rents, appreciation in value, or dividends. The values of these asset can rise in value to generate a return for the holder, but there is a risk that their valuations can also decline. Examples of growth asset are:
- Equity securities
- Rental property
- Antiques
Defensive asset generate income for the holder primarily from interest. The values of these assets tend to hold steady or can decline after the effects of inflation are considered, and so tend to be a more conservative form of investment. Examples of defensive assets are:
- Debt securities
- Savings accounts
- Certificates of deposit
Assets may also be classified as tangible or intangible asset. Intangible asset lack physical substance, while tangible assets have the reverse characteristic. Most of an organization’s assets are usually classified as tangible asset. Examples of intangible asset are copyrights, patents, and trademarks. Examples of tangible asset are vehicles, buildings, and inventory.
