How are 'assets' defined in accounting?

In accounting, assets are categorized as resources that are owned by a business and are expected to yield future economic benefits. This definition encompasses a wide range of items, including cash, inventory, property, equipment, and investments. The key aspect of this definition is the notion of providing future economic benefits, meaning that these resources can be utilized to generate revenue or reduce expenses for the business over time.

This perspective is fundamental in accounting because it forms the basis for the balance sheet, where assets are reported alongside liabilities and equity to provide a complete picture of a company's financial health. Properly identifying assets is essential for accurate financial reporting, as it affects the evaluation of the organization's ability to generate profit, manage debts, and sustain operations. Understanding this definition helps students grasp how businesses assess their value and make strategic decisions based on their resource availability.