what is fixed assets and current assets and what is the difference between the two?

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Difference Between Fixed Assets and Current Assets

Fixed Assets

1. Also called long-term assets, fixed assets are held by a business with the intentions of continuing use and not to be resold in a short period of time.

2. Fixed assets would usually last for more than a year or 1 complete accounting cycle of a business.

3. They are bought from long-term funds deployed within a business.

4. These assets are used to keep a business running and earn profits out of operations.

5. If and when required, fixed assets are not easy to convert into cash.

6. Examples of fixed assets include Machinery, Building, Furniture etc.

Current Assets

1. On the contrary, current assets are kept for resale, can be converted into cash or an equivalent in a short period of time.

2. Current assets are likely to be realized within a year or 1 complete accounting cycle of a business.

3. They are bought out of short-term funds deployed within a business.

4. These are assets which are converted to cash or exhausted during the regular accounting cycle of a business.

5. Current assets are easy to liquidate as compared to fixed assets.

6. Examples of current assets include Cash in hand, Cash at the bank, Stock, Debtors etc.

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