In this article, we have discussed the difference between Fixed assets and Current assets.
Fixed assets are the assets that are acquired for use in the business for a long period of time, generally more than one year. These assets are not meant for resale, rather, these are used for the production or rendering of goods and services. These assets help the business to earn income. For example, Machinery, Building, Goodwill, Plant, Furniture, etc.
Current assets are the assets that are acquired by a firm with the purpose of resale in the business in order to generate revenues. These assets are held for a short period of time. In simple words, current assets can be defined as the assets which are in the form of cash or which can be easily converted into cash within a period of one year during normal business activities. Examples of these assets are debtors, bills receivables, stock, cash in hand, prepaid expenses, etc.
Difference between Fixed and Current Assets
The following are some points of distinction between Fixed and Current Assets.
| Basis of Difference | Fixed Assets | Current Assets |
|---|---|---|
| Nature | These are considered long-term assets of a firm. | These are considered as short-term assets of a firm. |
| Motive | These are used for the production or rendering of goods and services. | Current Assets are acquired with the purpose of resale and generating revenues. |
| Funds | These are purchased out of long-term funds. | These are purchased out of short-term funds. |
| Valuation | These are valued at cost minus depreciation. | These are valued at ‘cost’ or ‘market price’, whichever is less. |
| Profit on Sale | Profit on the sale of these assets is regarded as capital profits. | Profit on sale of these assets is regarded as revenue profits. |
| Examples | Building, Furniture, Loose Tools, etc. | Debtors, Stock, Bills Receivables, etc. |
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