The Difference Between Assets and Inventory

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The difference between assets and inventory lies in substance. A person can touch actual inventory. Some assets remain untouchable. A person cannot reach out and hold reputation in his hand. Between assets and inventory lies an area called “asset inventory.” Asset inventory factors in both tangible assets and intangible assets.

Definitions

  • In terms of definitions, inventory consists of physical objects, while assets pertain to both tangible and intangible qualities. While all inventory might be considered assets, not all assets are inventory. Workers under contract to a business are considered assets and not inventory. When a business sells its “hard” assets, it sells the value of its inventory, but when it sells all of its assets, it also includes intangible elements. These elements add value to the business.

Inventory

  • When a business sells its inventory, it sells all of the physical elements of the business. These include items on the shelves, if the business sold is a retail or wholesale store. Inventory also includes office equipment, as well as office furniture, cleaning equipment, and in some cases, even the building housing the business. Inventory does not have to be in one physical location. While inventory might be sold from one location, storage can take place elsewhere. Businesses calculating inventory sometimes figure out “on-hand” inventory and “off-site” inventory. On-hand inventory is immediately accessible, while off-site inventory requires delivery or pickup.

Asset Inventory

  • Asset inventory combines aspects of both assets and inventory, incorporating both tangible and intangible elements. Asset inventory usually includes all financial accounts, such as checking accounts, money market accounts and bank accounts. It also includes real estate holdings. In addition, bonds, stocks and mutual funds are included in asset inventory discussions. Finally, all “hard” assets, including inventory, become part of the asset inventory equation.

Intangible Assets

  • Intangible assets differ from inventory due to the nature of those assets. In business terms, intangible assets include such nonphysical items as reputation and goodwill. Brand names are intangible assets. Intangible assets are important when purchasing existing businesses and brands. For example, Google's value is far more than the sum of its real estate, equipment, and bank accounts. Much of the company's value derives from intangible assets, including its reputation, patents it owns, goodwill, and brand.

References

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