Capital Assets

Capital assets are used in the day to day operations of a Corporation and have a useful life of more than 1 accounting period (usually 1 year). Capital assets are divided into 2 groups:

Property, plant and equipment (also known as fixed assets) include assets such as land, buildings, equipment, machinery, leasehold improvements and natural resources. On the other hand, intangible assets lack physical substance and include assets such as patents, leaseholds, copyrights and trademarks. A very popular example of a trademark is Coca Cola. Goodwill is also an intangible asset but it is shown separately on the balance sheet from Capital Assets.

For You to Know: An important note about Capital assets is that they are used in daily business operations to help generate revenue. This makes them different from inventory, which is an asset that is not used in daily operations but rather held for the purpose of resale. A corporation that purchases a digital camera for the purpose of resale lists its digital cameras on the Inventory section of its Balance sheet. But if this same firm purchases a digital camera for the purpose of using it in daily operations to generate revenue, would classify this asset as a Capital Asset.

>> More Accounting Terms & Glossary?