In the world of economics a lot of terminology can get lost in the shuffle, and one of those terms is assets. This option is one of the more important pieces that everyone should know and consider, especially when dealing with long term financial decisions. If you’re seeking a loan, for instance, you’ll often times have to record a list of these things in order to ensure that if you default, possessions can be repossessed. This is also needed for tax purposes, especially when audited, as you’ll need to prove the income that you have and if you can’t pay for items, repossession in that manner can once again occur.
For those that are not sure what would count, there are several different components that should be explored here. The main focal point should be in regards to tangible resources. Many people will find that the easiest way to define assets is through possessive understanding. For instance, if you have purchased a car and it is paid for, free and clear, than that is something you own. The same can be said for just about anything that you have in and outside of your home. These things together make your net worth in some manner.
Assets can also be determined for the purpose of collateral, as briefly denoted above. This is sometimes a requirement for a major, long term lending solution to agree with the terms to give you credit. For businesses this is a big deal, as it will allow a line of credit to be formed so that supplies, machinery and much more can be purchased out right. Some times in between jobs a company will require further extensions on what their purchasing power might be, and if they have any physical items of value, they can put it up against the loan so that if it is not paid back, the lender can than take away the item straightway.
For the majority of people trying to get a mortgage, a list of these things will be needed just to ensure that if anything goes awry with the repayment, there can be an additional option for the bank to get paid properly. A list can also help for instance purposes, especially if a home will be in an area that is susceptible to mother nature. When storms create flooding, or worst, belongings can get throw around and broken. However, if a proper list is given to the insurance company and a policy is drafted with the itemized possessions, a payout could be garnered.
All in all, the best way to understand tangible and certain intangible assets is to consider the preceding simple definitions. You’ll find that it’s important to note these terms for the purpose of dealing with any sort of short term and long term lending solution, as it will come up. When in doubt, create an itemized list of items that you have and then denote the value of each one including any depreciation and you’ll understand why it’s important to have a running inventory.