Online College Courses for Credit

+
2 Tutorials that teach Long Term Assets
Take your pick:
Long Term Assets

Long Term Assets

Rating:
Rating
(0)
Author: Sophia Tutorial
Description:

Differentiate between long term assets and short term assets.

(more)
See More
Fast, Free College Credit

Developing Effective Teams

Let's Ride
*No strings attached. This college course is 100% free and is worth 1 semester credit.

37 Sophia partners guarantee credit transfer.

299 Institutions have accepted or given pre-approval for credit transfer.

* The American Council on Education's College Credit Recommendation Service (ACE Credit®) has evaluated and recommended college credit for 32 of Sophia’s online courses. Many different colleges and universities consider ACE CREDIT recommendations in determining the applicability to their course and degree programs.

Tutorial
what's covered
This lesson will cover the topic of long-term assets.

Our discussion breaks down as follows:

  1. Long-Term Assets vs. Short-Term Assets
  2. Long-Term Assets
  3. Book Value


1. Long-Term Assets vs. Short-Term Assets

Long-term assets are assets that will be used for longer than one year, such as plant assets and long-term investments.

Short-term assets, also known as current assets, are assets that are converted to cash, used up, or sold within one year.

Long-Term Assets Short-Term Assets
Assets that will be used for longer than one year, such as plant assets and long-term investments Assets that are converted to cash, used up, or sold within one year
One Year or More One Year or Less

hint
Even if an asset is owned for a brief period, if that period is one year or more, it's still classified as long-term.

Now, how do we determine the classification of an asset, whether it is long-term or short-term? Well, we need to consider the nature of the asset, referring to how long it is meant to last. We also need to consider the nature of the use, meaning is it an asset we're going to use up within one year or less, or will it provide use over multiple years?

terms to know
Long-Term Assets
Assets that will be used for longer than one year, such as plant assets and long-term investments
Current Assets
Assets that are converted to cash, used up, or sold within one year


2. Long-Term Assets

Long-term assets can also be referred to as capital assets or fixed assets; these terms are interchangeable.

There are two broad categories within long-term assets:

  • Real Property
  • Personal Property

Real property is resources that have physical characteristics and are used in business operations. Note, the important piece of this definition is that they are used in business operations.

EXAMPLE

Examples of real property include things like land, land improvements, and buildings. These are typically going to be real estate, from which the term real property derives.

Personal property is tangible and intangible assets that are transferable among individual owners.

EXAMPLE

Personal property includes things like computers, company cars, as well as equipment--all items that can be transferable. And then equipment also falls into this personal property category.

terms to know
Real Property
Resources that have physical characteristics and are used in business operations
Personal Property
Tangible and intangible assets that are transferable among individual owners


3. Book Value

Book value is the cost of a depreciable asset less its accumulated depreciation. So, how do we determine book value? Well, book value of an asset includes the cost of the asset and any cost incurred getting that asset ready for use within the business.

In the case of real property, which includes things like land and buildings, or real estate, the types of costs that would contribute to the cost of an asset are:

  • Fees (e.g., appraisal fees, legal fees, title fees, etc.)
  • Structure removal, if any existing structures must be removed from the land
  • Construction, if a new building is being built on newly purchased land
  • Land preparation for development

The types of costs that would contribute to the total cost of personal property assets, such as equipment, automobiles, or computers, are:

  • Purchase price/cost of asset
  • Setup fees
  • Testing fees, if, for example, newly purchased equipment needs to be tested before it is operational
  • Installation
term to know
Book Value
The cost of a depreciable asset less its accumulated depreciation


summary
Today we learned about long-term assets, starting with a comparison of long-term assets versus short-term assets. Remember, long-term assets are used for one year or more, whereas short-term assets are typically used up in one year or less. We also learned about two broad categories within long-term assets, examining the difference between real property and personal property. Lastly, we discussed book value, which is the cost of a depreciable asset less its accumulated depreciation.

Source: Adapted from Sophia instructor Evan McLaughlin.

Terms to Know
Book Value

The cost of a depreciable asset less its accumulated depreciation.

Current Assets

Assets that are converted to cash, used up, or sold within one year.

Long Term Assets

Assets that will be used for longer than one year, such as plant assets and long term investments.

Personal Property

Tangible and intangible assets that are transferable among individual owners.

Real Property

Resources that have physical characteristics and are used in business operations.