Bookkeeping 101: Asset Accounts

Assets, in bookkeeping, refer to any item or resource that provides value to the company. Assets can come in the form of cash on hand (allowing a business to pay off invoices or report profits to shareholders) or in physical forms like equipment, property, and inventory. 

Tracking these assets is an important part of evaluating a company’s value, which is needed to secure loans, create an IPO, or become acquired. 

Assets are often sorted into different asset accounts, which help business owners and accountants discern where the company’s value is found. This guide will detail a few common asset accounts and why they are valuable to the business. 

Types of Asset Accounts

Each business will have its own unique asset accounts. Just because an account type is listed here doesn’t mean you will have this type of asset as you grow your brand. 

For example, you won’t have an asset for land and buildings if you rent your workspace. You won’t need an account for vehicles unless you have a working fleet. These account examples are meant to give you an idea of the types of accounts you could have—and how organizing them can help your business.

• • Cash: This is any liquid form of currency that your business has available.
  • Accounts Receivable: This account reports the value of goods sold on credit. It refers to invoices sent by the company that customers owe. 
  • Inventory: The goods that a company plans to sell. 
  • Supplies: Miscellaneous assets that a company has that help it do business.   
  • Equipment: Physical machinery or tools a company uses to create or modify inventory. 
  • Buildings and Property: Real estate the company owns (or has a mortgage).
  • Vehicles: Cars and trucks the company owns that make up part of its professional fleet.  

Not all assets will retain their value or appreciate over time. Your real estate investment may grow in value each year, but the value of your machines or vehicles will decline year after year. Advanced bookkeepers will account for fluctuating value in long-term investments to maintain an accurate picture of the company’s current value.  

How Do Asset Accounts Help Your Business?

There are many benefits to maintaining transparency in your asset accounts. By sorting your assets into clear categories, you can make decisions based on your various assets.

You can see how much cash you actually have on hand to invest in further equipment or marketing services. You can also better lure buyers and investors by proving the value of your business.

Asset management can also help you identify risks. For example, you might think an overabundance of inventory is a good thing, but this can quickly turn into dead stock that no one wants if it isn’t moved. 

This risk is especially true if you have a seasonal business (like Halloween decorations or women’s fashion) where demand for your goods changes dramatically. Your business may decide to convert your inventory assets into cash with more aggressive sales or changes in pricing. 

Good bookkeeping helps business owners better understand their companies and provides them with valuable information to support strategic business decisions. Keep this value in mind as you organize your assets and create new asset accounts to better record your resources. 

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