In this blog, you will be getting information related to What are long term assets & its different types with their example so that you will have clear understanding.
What Are Long Term Assets?
Long Term Assets are also called Non – Current Assets or Fixes Assets that give benefits to businesses or companies in more than one year, It includes fixed assets like copywriter, trademark, companies software, cash, building etc.
These are managed in the Balance Sheet and they have recorded the price at which they have purchased it. So it can not reflect the current value of assets. After having benefits, their cost will be distributed to the cover for long term expenses.
- It help the business or company to get benefits for a long time or many years.
- These are a collection of tangible and intangible. So according to the tangible, there will be many assets like buildings, Furniture, plants etc that we can touch and feel, hence according to non-tangible, there will be companies software, trademark, copyrights etc that we can not touch and feel.
- If we change in this then it can be a sign of capital investments.
Understanding Long Term Assets
It held companies or businesses balance sheets for many years because we know that it’s a long term investment that gives benefits in many years or to many years. and if there are physical assets that can be touched and felt then it is known as Tangible Long term assets like- Building, Machinery, Furniture and vehicles.
And On another hand, if there are assets that we can not touch and feel then it is non-tangible assets like- Trademark, Logo, Hosting, Copyright etc, so it should be considered. Below are the examples of Long Term Assets to understand.-
- It like property, plant, and equipment, which can include machinery, buildings, land, and vehicles.
- Like Investing in Stock, real estate and bonds or you can invest in other companies.
- It can not touch and feel are – Trademarks, patents and client lists.
How Many Types Of Long Term Assets?
There are two types, which are mentioned below-
You can touch and feel the assets of any company or business like Building, Machinery, Furniture, Land, etc. If you feel or touch any assets, you have to understand that it is Tangible Assets.
You can not touch and feel any company or business assets like Trademark, Logo, Companies or business software or mobile application, etc. So if you face these types of assets then they will be known as Intangible Assets.
Current VS Long Term Assets
|Parameters||Current Assets||Long Term Assets|
|Definition||It is also known as Short Term Assets that recovered investment of any business or company within one year.||It is also known as Fixed Assets that recovered the investment of any business or company in many years.|
|Components||Current assets are classified in cash and cash equivalents.||It is classified in Property, Plant Equipment, Trademark, Logo, Software, Patent and other long term assets.|
|Record Of Value||As we know, they recovered within a year and they were affected by market fluctuations and changing rates and also they have to maintain it according to the current cost.||But in this you have to maintain your assets according to historical costs and they recovered in many years.|
|Tangibility||It is tangible by nature.||But Long term assets are tangible and intangible both.|
|Depreciations||Since Current assets can be recovered within a year hence, it does not face any depreciation.||Their heir cost will be distributed to the cover for long term expenses.|
Example Of Long Term Assets
As we know that Accounting divides the Assets of any company into two parts which are – (1) Current Assets and (2) Long Term Assets. When we recovered our investment in a year then it will be current assets or short term assets but if we recovered our investment beyond one year then it will be Long term assets.
There are many types of assets in long term assets like investment, fixed assets and intangible assets.
PPE Or Property, Plant Or Equipment
Fixed assets are assets that you buy for a company’s internal use. For example- Cars, buildings and computers and these categories are known as Property, Plant and Equipment in accounting. and it is also known as touch and feel assets. and you have to maintain fixed assets in the company’s balance sheet at the purchase price.
Assets that you can not see
It means that there are not any physical products, just you have to only use it like- Domain name, hosting, logo, trademark, software, and application etc. you can only maintain a record when you buy those products.
Investment Hold For More Than One Year
Long term investments are those which you are going to wait for more than a year, if you buy any land for opening your own company then it is a fixed asset, but it is not a long term investment.
Understanding Total Assets and Net Assets
Total assets are fully similar to the accounting equation as the sum of Liabilities and Owner’s equity.
[ Formula ]
Total Assets = Total Liabilities + Owner’s Equity
Net Asset is a term used to get the difference between Total Assets and Total Liabilities.
[ Formula ]
Net Assets = Total Assets – Total Liabilities
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