Fixed Assets vs Current Assets

What are Fixed Assets?

Fixed Assets are the components of non-current assets, which are possessed by the enterprise with the intention of good use by the enterprise rather than resale. They are expected to furnish economic gains for more than 1 accounting year and are possessed by the enterprise for carrying out company operations. On the balance sheet, fixed assets are documented at their net book value, i.e. amortisation or purchase cost price less depreciation as the case may be.

What are Current Assets?

An asset is referred to be a current asset when it is expected to be realised or planned to be sold or utilised within 1 year or the enterprise’s standard operating period. Enterprises hold the current asset in the form of cash or their regeneration into cash or for utilising it in by furnishing goods and services.

Additional Reading: Tips to Write Accountancy Exam

This article is a ready reckoner for all the students to learn the Difference Between Fixed Assets and Current Assets.

Basis

Fixed Assets

Current Assets

Meaning

Fixed assets can be contemplated as long term assets which are obtained by the enterprise for an intention of pursuing to earn income.

Current assets refer to such type of resources which an enterprise possess for being dealt with and which are not possessed for more than a year.

Convertibility

Cannot be converted into cash that easily.

Easily convertible into cash.

Holding Period

More than a year.

Less than a year.

Valuation

Cost less depreciation.

Market or cash value whichever is less.

Financing

Long term funds.

Short term funds.

Pledge

Cannot be pledged.

Can be pledged.

Charge

Establishment of a fixed charge.

Establishment of a floating charge.

Sale of Asset

Will result in either capital profit or loss.

Will result in either revenue profit or loss.

Revaluation Reserve

Established when the value goes high.

Not created.

The above mentioned is the concept, that is elucidated in detail about ‘Difference Between Fixed Assets and Current Assets’ for the Commerce students. To know more, stay tuned to BYJU’S.