What Are Capital Assets And Non-Capital Assets In A Business

What Are Capital Assets

What Are Capital Assets

Capital assets are those assets that generate value for a business in the long run. Capital assets for a business that involves production are buildings, computers, machines, vehicles, and other PPE items.

A capital asset is something that a business acquires for more than one year and it is not intended to sale in the normal part of the business operations. They are also called long-term or fixed assets.

If a company acquires a van to support business transportation then it is included as a capital asset while on the other hand if a company buys a van for the purpose of selling then it is included as an inventory in the balance sheet.

Characteristics Of Capital Assets

  1. The useful life of a capital asset is more than one year
  2. The cost of the asset is more than the capitalization limit
  3. It is not acquired for selling or it is not sold in the normal part of the business
  4. It takes time to convert into cash.

Examples Of Capital Assets

The following are the most popular examples of capital assets in a business.

  • Building
  • Computer
  • Vehicles
  • Land
  • Machine
  • Equipment
  • Furniture
  • Power Plant
  • Production Facilities
  • Land Improvement
  • Building Improvement
  • Business Infrastructure, etc.

What Are Non-Capital Assets

Non-Capital assets are assets that can easily be liquidated within a short time to support day-to-day business operations. These assets are short-term assets that have a very short life typically one year or less.

Examples Of Non-Capital Assets

The following are the most popular examples of non-capital assets in a business.

  • Cash and Cash Equivalents
  • Prepaid Insurance
  • Prepaid Expense
  • Inventories
  • Short Term Investments
  • Supplies
  • Raw Material
  • Work In Progress
  • Finished Goods
  • Bank Deposits
  • Temporary Investments
  • Stocks Held For Selling
  • Accrued Income
  • Current Portion Of Deferred Tax

Difference Between Capital And Non-Capital Assets

As we know that capital and non-capital assets both are different the main difference between both them is their use and purpose in a business. Other differences are the followings:

Capital AssetsNon Capital Assets
They contribute to the business operationsThey also contribute to small parts of the business
Have limitations on liquidation Have no limitation on liquidation
Acquire for a long period Acquire for a short period
They are depreciated They are not depreciated
It significantly impacts the balance sheetNormally, it impacts the balance sheet but not as a capital asset
What Are Capital Assets


Is a laptop a capital asset?

If a company uses the laptop for regular business operations then it is included in the balance sheet as a fixed asset.

What are the 5 types of capital assets?

  1. Land
  2. Trademark
  3. Machine
  4. Vehicle
  5. House

Is cash a capital asset?

Cash is generally considered a non-capital asset.

Is the real property a capital asset?

Real property can be a capital asset but if a business acquires real properties with the vision of selling then it is included in the inventory which does not meet the criteria of capital assets.

Is the rental property a capital asset?

Rental property is not a capital asset.

Is cryptocurrency a capital asset?

Cryptocurrency is considered a capital asset and one must have to pay the capital gain tax when selling at a higher price.

How are capital assets taxed?

Capital gain tax will be paid on the profit once the asset is sold that is acquired by a company for more than one year.

Is land always a capital asset?

When someone acquires land for the purpose of investment it is considered a capital asset but if someone acquires land with the vision of selling then it is classified as an inventory.

Can books be a capital asset?

Books are the capital asset for a library and for a stationery shop, it is classified as an inventory.

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