Small Business Accountants

What are Assets?

In accounting, an asset is anything a UK business owns or controls that has measurable value and is expected to deliver future economic benefits. Assets appear on the balance sheet and are split between current assets, such as cash, stock, and receivables, and non-current or fixed assets like property, vehicles, and equipment. Intangible assets such as software licences and goodwill also qualify.

By Jordan Macey MAAT Reviewed by Noor Fiaz Updated 16 Apr 2026 1

Know What are Assets in Business Accounting - GoForma Small Business | UK Accountants & Tax Advisors

Key takeaways

An asset is any resource a business owns or controls that is expected to deliver future economic value, from cash in the bank to commercial property and intellectual property.
Current assets, including cash, trade debtors, stock and prepayments, are expected to be converted into cash or consumed within twelve months of the balance sheet date.
Non-current assets, such as property, vehicles, equipment and intangible assets like goodwill, are held for use over more than one year and depreciated or amortised over their useful lives.
The fundamental accounting equation states that assets equal liabilities plus equity, so the balance sheet always balances and shows the net asset position at a specific date.
Net asset value is calculated by subtracting total liabilities from total assets; for a limited company this equals the shareholders' funds shown at the foot of the balance sheet.

An https://www.goforma.com/small-business-accounting/31-accounting-terms-concepts-you-need-to-know" target="_blank">asset is any resource that is owned by a company. There are two main types of assets: current assets and non-current assets. Current assets are expected to be consumed within a year, while non-current assets are expected to be held for longer than a year.

Frequently asked questions

What is the difference between current and non-current assets?

Current assets are expected to be turned into cash, sold or consumed within twelve months. Common examples are bank balances, trade debtors, stock and prepayments. Non-current assets, also called fixed assets, are held for longer-term use and include property, machinery, vehicles and intangible assets such as goodwill and intellectual property. The split matters because it affects how working capital and liquidity ratios are calculated.

How are assets shown on a balance sheet?

A UK balance sheet lists non-current assets first, then current assets, with both totals combined to give total assets. The total must equal total liabilities plus shareholders' equity, confirming the balance sheet balances at the date shown. Under FRS 102 the balance sheet is prepared at a point in time, usually the company's year end, and shows the carrying value of each asset after depreciation or amortisation has been applied.

What is the accounting equation and why does it matter?

The accounting equation is: assets equal liabilities plus equity. It underpins double-entry bookkeeping because every transaction affects at least two accounts in a way that keeps both sides equal. If a business buys a machine for cash, one asset rises while another falls and the total stays the same. If it takes out a loan to pay for the machine, total assets and total liabilities both rise by the same amount.

What is the difference between tangible and intangible assets?

Tangible assets have physical substance, such as land, buildings, machinery and stock. Intangible assets have no physical form and include goodwill arising on acquisition, patents, trademarks and software licences. Under FRS 102, intangible assets are covered by Section 18 and are amortised over their useful economic life. Goodwill must be amortised under UK GAAP, unlike IFRS, where goodwill is subject to annual impairment testing instead.

How does depreciation reduce the value of an asset?

Depreciation is a systematic charge that spreads the cost of a tangible non-current asset over its expected useful life. Each year a depreciation charge reduces the asset's carrying value on the balance sheet and appears as an expense in the profit and loss account, reducing taxable profit for accounting purposes. For tax purposes the actual deduction comes through capital allowances rather than the accounting depreciation figure.

What is net asset value and how is it calculated?

Net asset value (NAV) is total assets minus total liabilities. For a UK limited company it equals the shareholders' funds, comprising share capital, share premium and accumulated retained profits or losses. NAV is a measure of the book value of the business at the balance sheet date. It does not reflect market value, which may be higher or lower depending on future profit expectations and the value of unrecognised intangibles.

Which accounting standard governs assets for UK small businesses?

FRS 102, published by the Financial Reporting Council, is the main UK accounting standard for small and medium-sized entities. It covers tangible fixed assets in Section 17, intangible assets in Section 18, and stock in Section 13. Micro-entities can apply FRS 105, which has simpler rules and fewer disclosure requirements. Both standards follow the historical cost model as the default, with FRS 102 also permitting revaluation for property, plant and equipment.

Can assets be negative, and what does that mean for a business?

Individual asset line items cannot be negative; a negative figure on the balance sheet represents a liability. However, the net asset position of a business can be negative if total liabilities exceed total assets, which means the company is technically insolvent on a balance sheet basis. Directors of a limited company have a legal duty under the Companies Act 2006 to consider creditor interests when insolvency is reasonably foreseeable.

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