Current assets and fixed assets are located on a company's balance sheet, which consists of the assets of a company whether they are financed by equity or debt. Current assets are short-term assets, and fixed assets are long-term assets.
Current assets can be converted into cash is less than one year. Current assets are used for running the business and paying operational expenses. As a result, short-term assets like current assets are liquid meaning they can be easily converted into cash.
Current assets on a balance sheet may include the following:
Fixed assets are long-term assets used by a company in producing its goods and services. Fixed assets have a useful life greater than one year. Fixed assets are listed on the balance sheet as property, plant, and equipment (PP&E). Fixed assets are also called tangible assets, meaning they have physical properties or can be touched.
Fixed assets can include the following:
- Vehicles like company cars and trucks
- Office furniture
The Bottom Line
Current assets can be converted into cash quickly while fixed assets are long-term assets that a company purchases used to generate growth over many years. Fixed assets undergo depreciation, which expenses the cost over their useful lives. Depreciation helps a company avoid a major loss in the year they purchase the asset by spreading the cost out over several years. Current assets are not depreciated because of their short-term life.
For more on assets, please read "How Do the Income Statement and Balance Sheet Differ?"