Personal Assets vs. Business Assets: What’s the Difference?

Personal Assets vs. Business Assets: An Overview

An asset is anything of value or a resource of value that can be converted into cash. Individuals, companies, and governments own assets. For a company, an asset might generate revenue, or a company might benefit in some way from owning or using the asset. For individuals, assets include investments such as stocks, bonds, and equity in a home. When assets are greater than liabilities, both a business and an individual are considered to have positive net worth.

Personal Assets

Personal assets are things of present or future value owned by an individual or household. Common examples of personal assets include:

• Cash and cash equivalents: Certificates of deposit (CDs); checking, savings, and money market accounts; physical cash; and Treasury bills all are examples.
• Property or land: Any structure that is permanently attached to the property or land also qualifies.
• Personal property: This includes boats, collectibles, household furnishings, jewelry, vehicles, and more.
• Investments: On the list are annuities, bonds, the cash value of life insurance policies, mutual funds, stocks, and retirement plans, including individual retirement accounts (IRAs), 401(k)s, 403(b)s, pensions, and more.

Your net worth is calculated by subtracting your liabilities from your assets. Essentially, your assets are everything you own, while your liabilities are everything you owe. A positive net worth indicates that your assets are greater in value than your liabilities; a negative net worth signifies that your liabilities exceed your assets (in other words, you are in debt).

Business Assets

For companies, assets are things of value that sustain production and growth. For a business, assets can include tangible property such as machines, raw materials, real estate, and inventory, as well as intangibles, such as patents, royalties, and other intellectual property.

A balance sheet lists a company’s assets and shows how they are financed, whether through debt or equity. It provides a snapshot of how well a company’s management is using its resources. There are two types of assets on a typical balance sheet: current and fixed.

Current Assets 

Current assets can be converted into cash within one fiscal year or operating cycle. They are used to facilitate day-to-day operational expenses and investments. Examples of current assets include:

• Cash and cash equivalents: Treasury bills, CDs, bank accounts, and physical cash
• Marketable securities: Debt securities or equity that are liquid
• Accounts receivable: Money owed by customers to be paid in the short term
• Inventory: Raw materials, work in progress, finished goods, and merchandise

Fixed Assets

Fixed assets are long-term assets, also known as “noncurrent assets.” Tangible fixed assets are those assets with a physical substance; they are recorded on the balance sheet and listed as property, plant, and equipment (PP&E). Intangible fixed assets are those long-term assets without a physical substance, such as licenses, brand names, and copyrights. Examples of fixed assets include: 

• Vehicles
• Office furniture
• Machinery
• Buildings
• Land
• Software
• Tools
• Computer equipment

One key difference between fixed and current assets is that the former can’t be quickly converted to cash, while the latter is expected to be liquidated within one fiscal year or operating cycle.

Key Differences

The primary difference between personal and business assets is whom they belong to. The former are owned by individuals; the latter belong to businesses.

Personal assets are more traditional ones, such as stocks, bonds, and real estate, as well as antiques, electronics, art and collectibles, and other valuables. They are used to grow the net worth of an individual. The money derived from them can be used to pay for retirement, a child’s college education, or to purchase real estate. Having a large quantity of personal assets also makes it easier to obtain loans.

Business assets can also include stocks, bonds, and real estate but are typically larger than the personal kind and used specifically for the business. They can also include machinery, other equipment, land, buildings, factories, and vehicles, as well as any intellectual property that gives the business a competitive advantage.

Business assets must be reported on financial statements in a specific way, which includes marking their historical cost and any depreciation. Personal assets are not taxable, though the income derived from them can be.

The Bottom Line

The accumulation of assets is the pursuit of monetary wealth. Individuals who build up their assets generally improve their financial status, especially if they aren’t carrying much or any debt. Businesses use their assets to generate profits, which benefit both their owners and investors.