The balance sheet is a financial statement that reports the financial position of an entity at the end of an accounting period by presenting the major categories and value of its assets, liabilities and shareholders’ equity on that particular date (balance sheet date). The account balances result from the closing of books in the double-entry system.
An asset is any physical object or right that provides an entity with probable future economic benefit (value) expressed in terms of money that has been obtained or controlled by the entity as a result of past transactions or events. An object or right is considered capable of providing value if it has the potential to be exchanged for something else of value, used to produce something of value or used to settle debt. Legal ownership is not a required characteristic of an asset (e.g., capital/finance leases are recorded as an asset on the lessee’s books).
Asset = Object or Right with Probable Future Economic Value
The balance sheet shows the relationship between a firm’s resources (it assets) and the sources of these resources (its liabilities and owners’ equity), where its reported total book value is the value of its total assets:
Assets = Liabilities + Owners’ Equity
Assets are typically listed on US balance sheets of nonbank and bank corporations in terms of decreasing liquidity, starting with the most liquid current asset and ending with the least liquid noncurrent asset. In the rest of the world, they are usually listed in the balance sheets of nonbank companies in terms of increasing liquidity.