Assets

What are assets?

Assets are everything your business owns that has value. This includes physical items like tools, vehicles, and equipment, as well as intangible things like money in the bank, money owed to you by clients, and intellectual property.

For contractors and small business owners, understanding your assets helps you know what resources you have available and what your business is actually worth.

Types of business assets

Assets fall into several categories:

• Current assets — Things that can be converted to cash within a year: bank accounts, accounts receivable, inventory
• Fixed assets — Long-term physical property: vehicles, equipment, tools, buildings
• Intangible assets — Non-physical items with value: patents, trademarks, business reputation

Assets on the balance sheet

Assets appear on your balance sheet alongside liabilities (what you owe) and equity (your ownership stake). The basic accounting equation is: Assets = Liabilities + Equity. Your total assets minus what you owe equals what your business is truly worth.

Accounts receivable—the money clients owe you for completed work—is one of the most important current assets for service businesses to track.