Usage: Operating and nonoperating

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Assets that are categorized by their usage can be considered operating or nonoperating. An organization uses operating assets in its day-to-day operations; these include cash, stock, buildings, inventory, equipment, machines, copyrights and patents.

Nonoperating assets generate revenue but are not required for business operations; they include new zealand phone numbers short-term investments, vacant property and interest income.

Bottom line: Convertibility, physical existence and usage are the three elements that make up the value of an asset.

How do you determine the value of your assets?
Asset valuation is incredibly important for a corporation's financial success, especially in the event of a company merger, loan application, audit or sale of the asset.   

Businesses should start by listing their assets on a balance sheet. [See our reviews of the best accounting software]. From there, they can add up their assets and use the basic accounting formula to determine their net worth. Larger businesses' assets need to be determined by a professional appraiser.

Tip: Consider the circumstances surrounding your business to choose the right valuation method for you.

There are four methods of determining the value of an asset: the cost method, the market value method, the base stock method and the standard cost method.

The cost method appraises an asset based on its original price. Because of the changes in the market and depreciation, however, businesses don't always get the most accurate results.


The market value method determines the value of an asset based on the price it would sell for on the open market.


The base stock method has the company keep a certain level of stock, and the value is assessed based on the base stock. Not every type of asset can be determined through this method.


The standard cost method uses expected costs, as opposed to actual costs, to appraise an asset. The company bases the expected cost on its experience with the asset and estimates what it will be worth in the future. To determine these costs, a business records the differences between expected and actual costs. Because actual costs often differ from expected costs, these differences are known as variances. Favorable variances are when actual costs are less than expected costs; unfavorable, or negative variances, occur when actual costs exceed expected costs. Variances can affect the company's valuation, and large, recurring variances should be investigated.
Understanding how to properly value your business's assets is critical to understanding its overall financial health. Using the methods above will help you ensure a more accurate valuation of your assets.