Accounting Fundamentals Certification (AFC) Practice Test

In accounting, the term "assets" refers to what the company owns. Assets are resources that provide future economic benefits and can include cash, inventory, property, equipment, and investments. They are an essential part of a company's balance sheet and are classified into current and non-current assets based on their liquidity and the time frame in which they are expected to be converted into cash or used up.

Understanding what constitutes assets is crucial for analyzing a company's financial health, as they play a significant role in the overall valuation and operational capacity of the business. The ownership of assets indicates a company’s ability to generate revenue and meet its obligations. This characteristic differentiates assets from liabilities—which are what the company owes—and income or expenses, which reflect the company's revenue-generating activities and costs incurred, respectively.