Meaning and recognition
Assets are resources under a company’s control that can produce economic benefits. They include more than cash and buildings: receivables, equipment, inventories and intangible items may also qualify. Accounting asks not only whether a useful item exists, but whether recognition conditions are met and its cost can be determined.
Illustrative purchase
If a manufacturer buys a machine for production, the machine may become an asset while cash in the account decreases. The purchase changes the composition of resources, but does not by itself mean the business immediately earned a profit. If the machine is leased, accounting depends on the contract and the applicable standards.
Assets and company value
Assets should not be confused with the company’s market price. Carrying amount reflects accounting rules and past transactions; the share price reflects investors’ expectations. Analysis should consider not only total assets, but also their quality, liquidity and ability to generate cash flow.