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Asset

Assets are simply items in your possession that are worth something if sold.

An asset is generally considered to be a large value item or an important item, e.g. a house, boat or car. Small value or insignificant items are typically grouped, e.g. CD collection, or stamp collection, and usually worth something if sold that way. Assets are always recorded with a positive value, e.g. car $5,000 or house $155,000.

How is an Asset Valued?

The value of an asset is determined by what someone else is prepared to pay for it that day, and what amount the seller will part with it for.

 

Quite often people get emotionally attached to an item and think it is worth more than it really is. For example I buy a TV for $1,000, and although it is new, 2 months later it probably will not be worth $950 because I think it is the best TV ever created. Chances are if I sell it, someone will only give me $500-600 for it. Check the market for a true representation of value, and only note the actual selling price, not the asking price (list price). I can ask $1,200 for the same TV but I’m unlikely to find a buyer.

 

All asset values are potential values until they are actually sold.

How Financial Institutions View Assets?

Banks typically only recognise quality assets that they would bother to dispose of if they had to make a claim against you. Banks use quality assets as a form of security against loans you may take. They prefer quality assets which increase in value, or hold their value over the medium to long term. Depreciating assets and small value assets are of no value because the cost of selling them would be close to the value of the items which would leave no money to pay back your loan. The loan contract will specify which assets they are allowed to take possession of and sell if you fail to meet the terms of the loan, so read your contract carefully or seek legal advice.

HouseCarBoat

CDsStampsTelevision

Further Reading

Asset (wikipedia)