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.

Also Explore: Examples of Current Assets

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

Fixed Assets

Current Assets

                                                                Definition
Fixed assets can be contemplated as long term assets which are obtained by the enterprise for the 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
                                                        Easy to convert to cash?
Not easy Very easy
                                                          How is it valued?
It’s value is calculated by subtracting depreciation from the cost It’s value is calculated on the lesser value between cost and market value
                                                        Type of financing involved
For financing of fixed assets long term funds are used For current assets financing short term funds are used
                                                          How long is the holding period?
Holding period is more than a year Holding period is less than a year
                                                          Tenure of service
Long term Short term
                                                            Type of Investment required
Long term investment Short term investment
                                                            Type of charge generated
Fixed Charge Floating charge
                                                            Creation of Revaluation Reserve
Created when there is appreciation in the price of fixed asset 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.

Additional Reading: Tips to Write Accountancy Exam

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