The accounting term used to describe an economic resource, which is owned by the corporation and expected to provide future benefits to its operation, is asset. Appearing on the balance sheet, assets are typically broken down into two categories:
- Tangible Assets: have a physical form, such as a building, land, or a piece of machinery
- Intangible Assets: usually involve a legal right or claim, such as a patent.
Assets = Liabilities + Owner’s Equity
Assets are usually recorded on the balance sheet at their historical cost less accumulated depreciation. This is not necessarily the value at which the assets could be sold. The balance sheet will usually provide a subtotal for current assets, which are more liquid holdings that can be converted to cash in less than 12 months.