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 equity/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, checking, savings, and money market accounts, physical cash, and Treasury bills
• Property or land and any structure that is permanently attached to it
• Personal property—boats, collectibles, household furnishings, jewelry, and vehicles
• Investments—annuities, bonds, the cash value of life insurance policies, mutual funds, pensions, retirement plans (IRA, 401(k), 403(b), etc.), and stocks

Your net worth is calculated by subtracting your liabilities from your assets. Essentially, your assets are everything you own, and 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 machines, property, raw materials, and inventory—as well as intangibles such as patents, royalties, and other intellectual property.

The balance sheet lists a company's assets and shows how those assets are financed, whether through debt or through issuing equity. The balance sheet 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 Assets 

Current assets are assets that can be converted into cash within one fiscal year or one operating cycle. Current assets are used to facilitate day-to-day operational expenses and investments.

Examples of current assets include:

• Cash and cash equivalents: Treasury bills, certificates of deposit, and cash
• Marketable securities: Debt securities or equity that are liquid
• Accounts receivables: Money owed by customers to be paid in the short-term
• Inventory: Goods available for sale or raw materials

Fixed Assets

Fixed assets are long-term assets, or non-current assets. Tangible fixed assets are those assets with a physical substance and 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, for example, licenses, brand names, and copyrights. 

Examples of fixed assets include: 

• Vehicles (such as company trucks)
• Office furniture
• Machinery
• Buildings
• Land

The two key differences with business assets are that non-current assets (like fixed assets) cannot be converted readily to cash to meet short-term operational expenses or investments. Conversely, current assets are expected to be liquidated within one fiscal year or one operating cycle.

Key Differences

The primary difference between personal assets and business assets is who they belong to, and that results in the differentiation of the assets. Personal assets are those that belong to individuals. These are more traditional assets, such as stocks, bonds, and real estate.

These types of assets are used to grow the net worth of an individual. The monetary gain from these assets can be used to pay for retirement, a child's college education, or to purchase real estate. Having a larger quantity of personal assets also makes it easier to obtain loans as well as favorable terms on these loans.

Personal assets can also include antiques, art, electronics, and other valuables.

Business assets, on the other hand, are assets owned by businesses. While businesses can also own stocks, bonds, and real estate, their assets are typically larger in nature and used specifically for the business. This can include machinery, other equipment, land, buildings, factories, and vehicles. It can also include intellectual property that gives the business a competitive advantage.

Business assets also need to be included in financial statements and have a specific way they need to be accounted for, which includes marking their historical cost and any depreciation. Personal assets do not need to be reported every year on taxes nor do they need to be accounted for.

The Bottom Line

The build-up of assets is generally considered to be a pursuit of monetary wealth. As individuals build up their assets, such as homes, investments, and equity, they are considered to be improving their financial status, primarily if this is in conjunction with lowering liabilities, such as debt. Businesses must prudently use their assets to generate profits, whereas not efficiently using assets can hurt a business.