A non-current asset is an asset that the company acquires or invests, but the value of that investment does not recur within an accounting year. These type of investments lasts for long and cannot be easily liquidated into cash and can generate economic benefits to the company for more than a year.
In other words, the company capitalises the cost of the assets or investment for a long time or many years, rather than evaluating it within the year of purchase of the asset. Non-current asset appears in the balance sheet of the company.
Balance Sheet Categorisation:
- Non-current assets are categorised on the balance sheet under the heading of investment, property, plant, equipment, intangible assets, etc.,
- The assets are classified according to the segment of the balance sheet
- Investments are always labelled as a non-current asset only if the total expected return is not expected within the next 12 months of the balance sheet
- Property, plant, land, buildings, and machinery including vehicles are fixed asset
- Intangible assets are goods that have no physical presence
- Intangible assets may also arise from the sale or purchase of a business unit
Property, plant and equipment: These non-current assets are incorporate of both tangible and fixed assets and cannot be liquidated into cash easily. Which includes:
- Property like land, building, etc.,
- Plant-like manufacturing companies
- Equipment, machinery
- Intangible assets: This asset does not have a physical appearance and can be intellectual properties. It is considered as a non – current asset because it cannot be liquidated to cash with 12 months of the investment. Some examples are:
The above mentioned is the concept, that is elucidated in detail about ‘What are Non-Current assets?’ for the Commerce students. To know more, stay tuned to BYJU’S.