Assets

In our previous Business Matters article, we introduced the foundational accounting equation:

Assets = Liabilities + Fund Balance

This equation underpins all financial reporting. It not only defines how resources are structured, but it also sets the stage for understanding the five core types of accounts that bring it to life in practice.

As we begin this next series, we will take a closer look at each account type, starting with assets. Because assets sit on the left side of the equation and represent the resources an organization uses to operate and grow, they provide a natural starting point for understanding how day-to-day activities are reflected in financial records.

What Is an Asset?

An asset is something an organization owns or controls that has value and can be used to support the business. Assets are resources that help an organization operate and can be used to support its operations.

Assets are not just things an organization has paid for outright. If the organization controls something and benefits from it, even if it was bought with borrowed money, it is still an asset.

At their core, assets are the resources that allow an organization to function, deliver services, and create long-term value.

Common Examples of Assets

Many assets are easy to recognize. Examples include:

• Cash in bank accounts or on hand
• Inventory, such as products held for resale
• Equipment, including machinery, lab equipment, vehicles, and tools
• Buildings or land owned or used by the organization
• Money owed by students or customers, often from unpaid invoices (like student tuition or for rental of campus space for an event)

Some assets are physical, and some are not. Both can be equally important.

Assets are also categorized based on how long they are expected to be used:

• Current (Short-term) assets are used within one year 
• Noncurrent (Long-term assets provide value over many years

Understanding assets is an important step, because they are the starting point for understanding an organization’s financial position.

Assets Are Not Just Physical Objects

It is common to think of assets as things you can touch, like equipment or buildings. However, many valuable assets are intangible.

For example, when a student owes tuition that has not yet been paid, that amount is still an asset. It represents a future economic benefit to the university and is recorded as accounts receivable.

Accounting focuses on value and usefulness, not physical form.

Categories of Assets

One of the most important ways to understand assets is to look at how quickly they can be used or converted into cash. This distinction helps explain how resources support both short-term operations and long-term goals.

Current Assets

Current assets are short-term in nature and are resources an organization expects to use, sell, or convert into cash within one year. These assets are closely tied to the rhythm of daily operations and are a key indicator of liquidity, or the ability to meet near-term obligations.

Common examples include:

• Cash, which is immediately available to pay expenses
• Accounts receivable, money owed by students, sponsors, or other parties
• Inventory, such as office or lab supplies
• Prepaid expenses, like insurance, membership dues, or subscriptions paid in advance

These assets are constantly changing. For example:

• When tuition is paid, accounts receivable becomes cash 
• When supplies are used, inventory decreases 

Because of this activity, current assets provide insight into how efficiently the university manages its day-to-day financial health.

Noncurrent Assets

Noncurrent assets, are long-term in nature and are resources that will provide value over multiple years. Rather than being used up quickly, they support an organization’s mission over time. Each of these examples highlights the different ways a university’s resources support its mission, beyond just cash:

• Buildings, such as classrooms, residence halls, and research facilities
• Equipment, from lab instruments to office technology
• Vehicles, used for transportation or campus services
• Infrastructure and systems, including major software platforms or campus improvements

Unlike current assets, these are not intended to be converted into cash in the normal course of operations. Instead, they are used to deliver services, support students, and enable research over time.

Noncurrent assets often represent the largest portion of a university’s resources and require careful planning for maintenance, depreciation, and replacement.

Depreciation 

An important concept tied to noncurrent or long-term assets, which is the process of spreading the cost of an asset over its useful life. This reflects the idea that a building or piece of equipment provides value over many years, not just at the time it is purchased.

Some noncurrent assets, like buildings and lab equipment, lose value over time due to wear and tear. This reduction in value is called depreciation.

Example:

• A lab microscope costs $10,000 and is expected to last 10 years. Each year, it “loses” $1,000 in value.
• This depreciation is recorded in accounting to reflect the declining usefulness of the asset, even though the microscope still works.

Depreciation ensures financial records reflect the declining value and usage of noncurrent or long-term assets, even though the asset may still be in use.

Why Assets Matter

Assets are more than just a list of what a university owns, they represent the resources that make day-to-day operations possible and support long-term success. They help answer important questions, such as:

• Does the university have enough resources to meet its current obligations?
• Are the right tools and infrastructure in place to support teaching, research, and operations?
• How efficiently are resources being used, or are they tied up in areas like receivables or inventory?

Ultimately, the strength and composition of assets provide insight into both financial stability and operational flexibility. A well-managed asset base allows the university to respond to challenges, invest in priorities, and continue delivering on its mission.

However, owning many assets does not automatically mean an organization is successful. Assets show resources, not results. Equipment, buildings, and funds must be used effectively to create value.

That’s why assets must always be considered alongside liabilities, fund balance, revenue, and expenses.

How Assets Are Recorded and Tracked Over Time

Assets are recorded in an organization’s accounting system with key details, such as:

• Acquisition cost
• Date acquired
• Useful life (for depreciation)
• Restrictions (e.g., donor restrictions on endowment funds)

Accurate tracking allows an organization to:

• Plan for maintenance and replacement of facilities and equipment
• Monitor grants and restricted funds
• Report accurately to boards, auditors, and government agencies
• Ensure proper insurance coverage

Equipment Inventory Procedure

Because departments purchase and use equipment, the university maintains a formal equipment inventory process to ensure records remain accurate and complete.

Step 1: Determine if equipment should be capitalized

The capitalization threshold is the minimum cost at which an item is recorded as an asset rather than expensed.

To be capitalized, equipment must:

• Be movable and not permanently affixed 
• Have a cost of $5,000 or more (or a gifted value at that level) 
• Have a useful life of one year or more 
• Be non-expendable (not consumed during normal use, it remains intact and usable over time).

Step 2: Tag the equipment

Each asset is assigned a unique identification tag to enable tracking. A tag tracks the following information:

• Individual or department to whom the equipment is assigned
• Description, serial, or manufacturer identification number
• Original cost and acquisition date
• Purchase order number (if applicable)
• Category of Equipment (i.e., scientific equipment, vehicles, artwork, furniture, or infrastructure, etc.)
• Location (building and room number)
• Disposition date, if applicable (the date on which the university disposed of the equipment through sale or surplus)

Step 3: Monitoring equipment inventory 

Inventory monitoring ensures accuracy and compliance through:

• Ongoing updates when equipment status changes 
• Quarterly audits to verify physical location and condition 
• Biennial certification where departments confirm inventory accuracy 
• Internal and external audits

Departments must also report status changes as they occur, including:

• Transfers (to other departments or assigned individuals) or relocations 
• Returns to vendors 
• Trade-ins 
• Theft or loss 
• Disposal or recycling (i.e. sent to Campus Recycling or Surplus)

Equipment Disposals

University equipment must be disposed of in accordance Policy 55.071 Disposition of Surplus Property. University departments do not have the discretion to dispose of university owned assets on their own. Because most equipment is purchased with public or donor funds, it is considered public property. Items must go through the formal surplus process to ensure accountability, transparency, and compliance.

Why Assets Are Important

Assets help answer critical questions and provide valuable insights that support planning and decision-making. For example:

• Are there future obligations funded through restricted assets or endowments? (donor-restricted funds).
• Is there too much inventory? This can indicate that cash is tied up in items that aren’t being used or sold, limiting flexibility for other needs.
• Aging or outdated equipment can reduce efficiency, increase maintenance costs, and hinder productivity.
• Too little cash on hand can create challenges in meeting payroll, paying vendors, or responding to unexpected expenses.

By analyzing assets, the university can:

• Plan investments in new buildings, technology, or equipment.
• Evaluate resource utilization across departments.
• Prepare for future needs, such as expansions, upgrades, or replacements.
• Balance short-term demands with long-term strategic goals.

In this way, accounting plays a critical role. It doesn’t simply track assets, it provides a framework for evaluating how well those resources are being managed. Strong decision-making comes from not just having assets, but from understanding their value, condition, utilization, and lifecycle within the organization.

Key Idea to Remember

Assets are the foundation of an organization’s operations. They are more than cash and they include buildings, lab equipment, tuition receivables, and investments.

By tracking assets carefully, public universities can:

• Plan for daily operations and future growth
• Demonstrate stewardship of public and donor funds
• Make informed decisions about facilities, programs, and research

What Comes Next

Now that we have explored assets, what the organization uses, the next step is to examine liabilities, what the organization owes. In the next edition, we will cover accounts payable, deferred revenue, and long-term debt, and how they connect to the resources discussed here.