Fixed Assets VS Current Assets: Difference between fixed assets and current assets?

Fixed assets vs current assets


When comes a company's balance sheet then definitely comes assets. In any business, there are two types of assets these are current assets and fixed assets. You know what is the difference Current assets and fixed assets.

Fixed Assets vs Current Assets
Fixed assets are capital assets (plant, properties and equipment) that company use for more than one year.
             Current assets like prepaid expenses, inventory etc that can be converted to cash within one year.

Fixed Assets
Fixed assets is called as 'long term assets' that a business or firm uses to produce profit over year. Fixed assets aren't liquid assets or it cannot be sold or converted into cash within one year. Fixed assets help to generate income over long term. Fixed assets financed by equity investment, debt investment, loans against securities etc. It works long period of time. Example: Plant, land, buildings, machinery etc.
             Fixed assets can be tangible assets (land,plant and building) which has physical existence or it can be intangible assets (patent, trademark and copyright) which has not physical existence but can realized.
            Fixed assets have useful life. So,fixed assets are depreciated over period of time with the purchased price. According to accounting methods, tangible assets are depreciated and intangible assets are amortized.

Fixed Assets on Balance Sheet
Fixed assets find in the company's balance sheet under plant, machinery, building etc.  Fixed assets also appear in company's cash flow statements, when company purchase sell or buy assets and depreciated. Balance sheet helps to understand company's financial health. 


Current Assets 
Current assets are assets that can be converted to cash within one year. Current assets is high liquidity assets or can be converted into cash within one year. It uses day to day business activities. Some Current assets are cash & cash equivalents, accounts receivable, short term investments (stocks, mutual funds ), these assets provides for day to funding of business operations or activities. 
              Few current assets are liquid assets because these types of assets converted into cash very short term (within 90 days) like stocks, inventory etc.  Current assets are needful to continue day to day business activities or operations. Current assets are crucial items to planning short term future of a company.  Current assets help to achieve short term goals of a company.

Fixed assets vs Current assets
Liquidity: Fixed assets are long term assets which are not liquid.
             Current assets are short term assets which are liquid in an operating business activities.

Convertible: Fixed assets cannot be converted easily into cash form within one year.
              Current assets can be converted to cash within one year.



Tenure:
In fixed assets, more than one year.
       In Current assets, less than one accounting year.

Valuation: In fixed assets, purchase price - Depreciation.
               In Current assets, cost or market value, whichever is lower.

Sale of assets: In fixed assets, income or loss from capital gains.
             In Current assets, income from sales or other income.


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