Welcome back to part two of our blog series on An Introduction to Tracking Your Stuff. In Part One, we reviewed how to define the stuff you’re tracking. Now, we’ll take a deeper dive into what is considered an item vs. an asset and why it matters.
An ASSET is a useful or valuable thing. An ASSET typically has a value and unique attributes that need to be tracked. An ASSET may help generate revenue, be used by employees for specific tasks or jobs, require periodic maintenance or calibration, and depreciate over time with a useful lifespan and specific salvage value. If any of these attributes ring true about the object you’re looking to track, it’s likely best treated as an ASSET.
Examples of assets include:
- office furniture
- computer equipment
- even people or employees can be treated as assets.
Each “item” is further defined as an Inventory Item or an Asset Item. Inventory items are generally defined as something the business “consumes” as part of a business process. Asset items are generally defined as items that the business “uses” for accomplishing part of a business process. It is essential to note that some ITEMS can be defined as Inventory items and Asset items depending on their role in the business process.
Looking at the examples below you can see how an item such as a cell phone is inventory if it is being sold through a retail outlet or it can be an asset if it is used by a company as part of a business process. While similar in many ways, there are subtle differences in the way you track inventory verses assets and thus it is imperative that you correctly identify each item that you plan to track. Let’s take an automobile as a second example. A car dealership classifies an automobile as inventory while a delivery service would classify the automobile as an asset.
Inventory items generally meet one of the following rules:
- Items that are received in and then transferred (sold) to consumers
- Items that are used as a raw material in the creation of a finished good
- Finished goods (hair dryer, cell phone, grain, automobiles)
- Raw materials (steal, nuts/bolts, chemicals,
Asset items generally meet one of the following rules:
- Items that have significant value and are depreciated over time
- Items that are used to accomplish part of a business process
- Items that are rented or borrowed and then returned by the user
- Office equipment (computers, cell phones, files, furniture, art)
- Equipment (tools, machinery, medical equipment)
Stay tuned for part three of our series on Tracking Your Stuff, where we’ll explore the best ways to track your stuff.