2.1. Asset Accounting

Theory

Key Terms & Definitions

Asset — An economic resource controlled by a business that is expected to provide future financial benefit and can be measured reliably.

Asset Accounting — The part of accounting that focuses on tracking, valuing, and managing all business assets throughout their life cycle.

Current Assets — Assets expected to be converted into cash within one year. Examples: Cash, Receivables, Inventory, Short-term Investments.

Non-Current Assets — Long-term assets used in business operations for more than one year. Examples: Buildings, Equipment, Vehicles, Software.

Depreciation — The process of spreading the cost of a long-term tangible asset over its useful life (e.g., equipment, buildings).

Amortization — The same cost-spreading principle as depreciation, applied to intangible assets (e.g., software, licenses, patents).

Useful Life — The estimated period during which an asset is expected to be used economically by the business.

Intangible Assets — Non-physical assets that still provide economic value. Examples: Software licenses, Patents, Trademarks.

Tangible Assets — Physical assets that can be touched and seen. Examples: Machinery, Inventory, Buildings, Vehicles.

Liquidity — A company’s ability to meet short-term obligations using its current assets.