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Cash in hand, unused land, living home do not generate any stable income when compared to cash deposited in the bank, rented land and rented home.

Why are they still considered as an asset?

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    Because you can still trade the cash in hand for goods and services. You can also sell/use as collateral any unused land or a living home
    – rhavelka
    Mar 16, 2021 at 14:09
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    Why do you consider something NOT to be an asset just because it doesn't produce an income? What do you say an asset is ?
    – AakashM
    Mar 16, 2021 at 14:53
  • The term ‘asset’ signifies all kinds of resources that help generate revenue as well as receivables. from groww.in/p/assets-and-liabilities Mar 16, 2021 at 15:04

3 Answers 3

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An asset is simply something that has value and is worth something. It doesn't necessarily need to generate any income (stable or otherwise). Cash is an asset because you can use it to buy things. A home is an asset because it is a place for you to live. Unused land could be put to use (build structures on it, agricultural use, recreational use), leased/rented for income, or sold.

Some assets (e.g. stocks/bonds, investment real estate, etc.) do provide income, but providing income is not a prerequisite for something to be considered an asset.

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I would say the definition you linked to in a comment is incorrect, or at least misleading. As yoozer8 noted, an asset is simply something that has value; it doesn't need to produce income just by existing.

Think about it this way. Suppose you own a valuable asset like a rental property. Then you sell it for a million dollars. Now you have no rental property but a million dollars in cash. If cash were not an asset, then you would have impoverished yourself by trading away your asset for a non-asset. Why would anyone do such a thing?

Of course, that's not the case. In selling something you are simply trading one asset for another. The definition you quoted refers to "generating revenue", but that only has meaning if the revenue itself is considered an asset (otherwise why would you care about getting it?).

And anything you can sell can generate income, because you can get income by selling it. So even if something doesn't passively "produce" income, it's still an asset as long as you can somehow convert it into money.

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I think that Deepak is slyly trying to score a point on Buffett/Graham here. Buffett says that gold, bitcoin, etc. are not investment assets because they have no earnings.

But because physical cash can immediately start earning interest in the bank, it is still an asset even if some weirdo decides to bury the cash in the backyard.

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    There's a difference between an "investment asset" and an "asset". Mar 16, 2021 at 19:16
  • I believe in something called narrow banking. You can see my other thread money.stackexchange.com/questions/137574/…. But when I was looking out for some information on ideal asset I happened to read an article which stated home which is rented to be ideal case of asset. This made me post the question. Mar 16, 2021 at 19:26

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