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Economics

What is an Asset?

An asset is something which has ascertained an importance in human life. It may be due to its utility in day to day life or inevitability in supporting our existence. The more we use a particular thing the more it becomes valuable to us. As a result with human activity every single day we are creating an asset. There are various types of assets and they have been classified into various types of categories.

Firstly let us look at money as an Asset, We use money to buy things such as fruits & vegetables, pay salaries. We receive salaries or proceeds in the form of money when we work or sell something. We use money as a medium of exchange for almost everything. As a result we can come to a conclusion that money is a vital asset.

what is an asset
Types of asset

Types of Assets

Based on the origin there are different types of assets and all the types of useful material can be classified into these assets. They are as follows.

  1. Property represents Land, Building, Construction etc
  2. Commodity represents ( Anything that comes out of Earth {Land & Oceans} – be it agricultural produce like cereals, oilseeds, fruits & vegetables, fisheries, metals, petroleum products etc )
  3. Equity represents ( A combination of one or more Commodities )
  4. Bonds represents ( A contract, a promise, Loan)
  5. Currencies represent a mathematical expression to end the double coincidence of wants (Paper, coins, cryptocurrencies)
  6. Insurance represents (risk pooling )
  7. Art represents ( Intangible aspects like branding, abstract, personality, reputation, music, creativity etc )

Relationship between Trading, Investment and Assets

Any type of trading or investment or exchange is only possible between different types of assets. As you can see above every aspect that is near and dear to humans have been put into different categories of assets. Assets have a defined useful life cycle. Finally when the useful life of an asset completes, an asset turns into a liability. In other words, everythig is in sync with the nature’s cycle.

There are other types of classification of assets. For example –

  • Tangible
  • Intangible
  • Fixed
  • Current
  • Non Current
  • Operating etc

Finally, as there are many calssifications, we are just going to focus only on the important ones. In other words our base classification is sufficient to clear our doubts regarding types of assets. The other types of classification are not only utalitarian and contextual but also useless in clearing our concepts of assets in a broader sense.

By Kanishka Singh Rathore

  1. Engineer
  2. Financial Planner
  3. Editor

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