Difference Between Fixed Assets and Current Assets | Asset Finance Help | Guidance on Asset Finance | Different Types of Asset Finance

Difference between fixed assets and current assets

Difference between fixed assets and current assets 750 400 Lorna Slee

A company’s assets are the items which are used for the benefits of the business. These could be things that help with the day to day running of the business such as buildings or those items which generate income such as inventory or stock.

A business will classify its assets in to 2 specific categories. Firstly, fixed assets which are typically those tangible items such as property and plant equipment that a company will use on numerous occasions over more than 1 yearly accounting period. Secondly, current assets such as cash or inventory which a company will either use or sell within the same calendar year.

The phrase fixed asset comes from the fact that it will not be consumed, cannot be sold or cannot be converted into cash. They are longer term business assets which means they have a useful life of more than just a 1-year period. Items include property, land, software, IT equipment and vehicles.

A current asset equates to something which can be used, consumed or sold by a business within a dedicated financial year. The asset will appear on a company’s balance sheet and includes items such as cash, stock, paid-for liabilities and liquid assets.

Another key difference between a fixed asset and a current asset is depreciation. Fixed assets have a much longer life than current assets and therefore will depreciate over time, whereas a current asset has a limited shelf life and therefore will not be subject to depreciation.

Here at NGI we are often asked to assist with the business finance for both fixed assets and current assets. Clearly there are many types of financial solutions available to purchase new business assets, these include traditional loans, asset finance, invoice finance and commercial mortgages. Being able to define the correct category in which an asset fits, is critical to any successful application.

If you have any questions or need some help with regards to fixed asset finance or current assets finance, then please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.

We can provide you with tailored business finance solutions.

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