Long-Term Assets

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Long-Term Assets

Long-term assets are grouped into several categories. The following are some of the common terms you will encounter.

Things To Know

  • Every company has different assets depending on its industry.

Fixed assets

Fixed assets are those tangible assets with useful lives greater than one year. Generally, fixed assets are items such as equipment, buildings, production plants, and property. On the balance sheet, these are valued at their cost.

Depreciation

Depreciation is the process of allocating the original purchase price of a fixed asset over the course of its useful life. Depreciation is subtracted from all except land. Fixed assets are very important to a company because they represent long-term illiquid investments that a company expects will help it generate profits. Depreciation appears in the balance sheet as a deduction from the original value of the fixed assets.

Intangible assets

Intangible assets are non-physical assets such as copyrights, franchises, and patents. To estimate their value is very difficult because they are intangible. Often there is no ready market for them. Nevertheless, for some companies, an intangible asset can be the most valuable asset it possesses.

Remember that every company will have different assets depending on the industry in which it does business. However, it is important to know and understand the major accounts that will appear on most balance sheets.