What is an asset?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
An asset is something a business owns that has value to it, such as money in the bank, amounts customers owe, stock on hand, equipment and vehicles. Assets are listed on the balance sheet, split into current assets, which are cash or can become cash within 12 months, and longer-term assets such as equipment.
Each kind of asset has its own account in the books, such as bank, accounts receivable, inventory and equipment. Under double-entry bookkeeping an asset account increases with a debit and decreases with a credit, so buying a laptop from the bank account moves value from one asset to another and leaves total assets unchanged.
Current assets are what pays the bills over the coming months, while fixed assets, such as tools, fit-out and vehicles, are what the business uses to earn its income. How a long-lived asset is treated in the accounts is a question for your accountant.
In Australia
business.gov.au describes assets as things you own: cash, or something you can convert into cash, such as property, vehicles, equipment or inventory. Its balance sheet template groups current assets, such as cash, petty cash, inventory and prepaid expenses, apart from fixed assets, such as property and land, vehicles, equipment and tools, and furniture.
The same site lists records of all expenses related to your assets or stock among the records a business needs to keep. The ATO notes that records about an asset can need keeping for longer than the usual 5 years. Its example is land: the purchase records are kept for 5 years after the land is handed over, and longer if the business then builds on it.
Worked example
| Asset | Type | Amount (AUD) |
|---|---|---|
| Bank | Current | 6,400.00 |
| Accounts receivable | Current | 2,900.00 |
| Inventory | Current | 3,750.00 |
| Equipment | Fixed | 8,500.00 |
| Vehicle | Fixed | 18,000.00 |
| Total assets | 39,550.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Keeping an asset in the books after it has been sold, scrapped or lost, so the balance sheet shows more than the business owns.
- Throwing away the purchase records for equipment or property the business still owns.
Related terms
Related service
Management and cash-flow reports
Monthly reports that show where the business stands.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Set up a balance sheet
business.gov.au, Australian Government. Current at 15 October 2026, released 18 January 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Record keeping
business.gov.au, Australian Government. Current at 15 October 2026, released 7 November 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Record-keeping tips
Australian Taxation Office. Current at 25 October 2022 (QC70730), released 25 October 2022. Checked 15 October 2026.
© Australian Taxation Office for the Commonwealth of Australia Licence: ATO website copyright notice (copy, adapt and distribute, without implying ATO endorsement).