What is an Asset?

If You Own It and It Brings Value — It’s Probably an Asset

What is an Asset?

An asset is something valuable that a business owns or controls and expects to use for more than one year to help it make money.

Think of it like this: if you buy a delivery van for your business, you don’t just use it for one day — you’ll be using it for years to deliver goods, helping your business operate. That’s an asset.

Assets can come in many forms, including:

• Physical items: buildings, machinery, vehicles, computers
• Cash and bank balances
• Money owed to your business (we call this “accounts receivable”)
• Intellectual property or trademarks

Why Isn’t an Asset Considered an Expense?

An expense is something you spend money on that is used up immediately or within a short time — like paying for electricity, salaries, or office supplies.

So, when you spend RM100 on office stationery, it’s an expense — used up quickly, and you’ll probably need to buy more next month.

But when you spend RM50,000 on a delivery truck, that truck will benefit your business for several years. Instead of recording it as an expense all at once, it goes into your accounts as an asset, and its cost is spread out over time (this process is called depreciation).

How Are Assets Shown in Financial Statements?

Assets appear on the balance sheet — a financial statement that shows what your business owns, what it owes, and the value of your business at a point in time.

The income statement (or profit & loss statement), on the other hand, shows your revenues and expenses over a period. Since assets are not “used up” immediately, they don’t appear here (except for a portion of depreciation, which is treated as an expense over time).

Do Assets Always Stay the Same Value?

No — and that’s where revaluation comes in.

Some assets change in value over time. For example:

• Land and buildings might increase or decrease depending on market conditions.
• Investment properties may need to be adjusted to reflect current market prices.
• Foreign currency balances might fluctuate due to exchange rates.
• Machinery or equipment might be overvalued if technology changes and it becomes outdated.

When this happens, accountants may need to revalue the asset in the accounts — either up or down — to reflect its true worth today. This helps keep the financial statements accurate and relevant.

Examples of Assets That May Need Revaluation

1. Land and Buildings
   Land might appreciate in value, while a building may lose value over time or require impairment due to damage.
2. Foreign Currency Accounts
   If you hold USD in your Malaysian business, exchange rate changes might require adjustments.
3. Investments
   Shares or investment properties need to reflect current market value.
4. Long-Term Equipment
   If machinery becomes obsolete, its book value might need to be written down.

Know What Your Business Really Owns

Understanding what qualifies as an asset (and what doesn’t) is important for keeping your business accounts in order. Assets help your business operate and grow — and recognizing them properly in your books gives a clearer picture of your company’s true financial health.

So next time you invest in something big for your business, ask yourself: “Will this benefit me for a long time?” If the answer is yes, chances are — it’s an asset, not an expense.