Non-Current Asset

Non-current Assets are long-term investments made by a company where the full value is not realised within the financial year. They tend to be largely illiquid, meaning these funds cannot be readily converted into cash. Long-term funds are investments, intellectual property, real estate and equipment. Long-term funds appear on a firm’s balance sheet. Long-term assets are easy to transform into cash and are typically utilised for long-term investments. These assets have low liquidity. On the other hand, short-term investments are more liquid, and you may cash out your investment whenever you want.

What are the Non-current assets?

The common examples of the non-current assets are accounts receivable, Inventory and other liquid assets, whereas property, land, equipment and machinery are examples of non-current assets. The non-current assets are the assets that can be held for more than a year. Companies or organisations hold these assets, and the expense of these assets is spread out over time. Tangible and Intangible assets including reputation, branding, and goodwill, are non-current assets examples. All of these are classified as such because they are difficult to convert into cash and are expected to remain stationary for a long time.

In simple words, the corporation capitalises the cost of the investment or assets over a long period of time, rather than evaluating it in the year in which the asset was purchased. The company’s balance sheet includes a non-current asset.

What are the various categories of Non-Current Assets?

The non-current assets are classified into two types which are:-

Tangible Assets

Physical assets are the assets that an organisation or firm possess, such as real estate or equipment, which are known as tangible assets. These are the most common assets used by businesses to create goods and services. The initial acquisition cost minus all cumulative depreciation equals the value of the property, plant, and equipment item. Depreciation is a non-cash notation that shows how much an asset has depreciated in value over time. Not all physical assets, however, are depreciated. Land, for example, increases in value with time yet is held for a charge. It consists of the following assets:-

• Building

• Property

• Land

• Equipment

• Machinery

• Plants

Intangible Assets

This class of assets do not have a physical appearance, but they exist with an organisation or a person that helps with the business. Intangible Assets are goods that have a high economic value. These assets could be patents, trademarks, PPE etc and from the purchase or sale of the business units. Brand value or goodwill is a most suitable example of an intangible asset. There are some intangible assets having a finite lifespan that remains in the company until the arrangement and contract duration. It consists of the following assets:-

• Goodwill

• Patent

• Branding

• Reputation

• Trademark

• Copyright

Natural Resources

Natural resources are those that originate from the earth. Wood, fossil fuels, oil reserves, and minerals are examples of natural resources. Natural resources are also referred to as a waste of assets because they deplete as they are used up. Assets must be utilised through natural resource extraction, which incurs additional costs. Natural gas, for example, is a natural resource that must be mined to be used. In other words, you must mine or pump an asset out of the earth to use it. The acquisition cost plus exploration and development expenditures minus progressive depletion are shown for natural resources.

Conclusion

In the above notes, we have learnt about the Non-current asset. We learnt that Non-Current Assets are the long-term assets that a company buy intending to utilise in business & it gives benefits after a significant number of years. Non-current Assets have statistics about the investment made by the company & could be either Intangible or tangible. Non-current assets are Fixed Assets of a company like Plant, equipment, Property, Land & Building, Goodwill, Long-term Investment in stocks and bonds, Trademarks, Patents etc. Natural resources are also categorised under non-current assets as they deplete with time.