What Are Non-Current Assets
Non-current assets are the core part of the business operations that help a business to make revenue through production and sales. These assets are directly used in business functions such as manufacturing, packaging, and selling. (A Detailed Article On Assets)
What Are Non-Current Assets
Non-current assets are the long-term assets that are held by a company for strategic planning and revenue-making over the business cycle.
These assets are highly illiquid and are not easy to convert into cash. NCA depreciates and loses its value over its useful life. Some non-current assets are depreciated, some are amortized and some are depleted. (Learn About Current Assets)
Which Non-Current Assets Are Depreciated?
- Building
- Furniture
- Fixture
- Vehicles
- Machinery, etc.
Which Non-Current Assets Are Amortized?
- License
- Patents
- Government Grant
- Trademark
- Copyrights, etc.
Which Non-Current Assets Are Depleted?
- Timberland
- Oil Reserves
- Gas Reserves
- Mineral Resources
- Gold Mines, etc.
What Is Fixed Asset Turnover
The fixed asset turnover ratio is an important ratio for a company that measures how efficiently a company is making revenue from the investment in those assets. The ratio is so important to know the utilization of fixed assets in business operations.
How to calculate fixed asset turnover
Fixed Asset Turnover= Net Sales/Average Fixed Asset
Net Sales: The net sales mean the total of the company − all sales returns, discounts, and allowances.
Average Fixed Asset=Value of the asset at the start of the year + value of the assets at the end and divide it by 2.
What Are Net Fixed Assets
Net fixed assets are the value of the fixed assets after deducting the accumulated depreciation.
How to calculate net fixed assets
Net Fixed Assets= Gross price of the assets at the time of purchase + any additional capital improvement − accumulated depreciation.
What Are The Main Examples Of Non-Current Assets
Here are some of the most famous examples of non-current assets:
- Land
- Building
- Machinery
- Furniture
- Vehicle
- Fixture
- Long Term Investment
- Property Investment
- Long Term Lease
- Franchise Rights
- Royalty Rights
- Contract Assets
- Computer Software
- Office Supplies
- Table, etc.
Why Non-Current Is Important In A Business
Non-current assets are an essential part of the business because these assets help a business to generate income from the business operations. Without NCA, production cannot take place. Here are the benefits of NCA:
- Long-term assets represent an investment that runs longer which means the expansion of the business
- Income is generated by using NCA in the business operations
- NCA plays a good role in increasing productivity and capacity
- Getting a loan can be easy
- Getting tax benefits because of depreciation
- Getting more investors can be possible if a company has more NCA.
Non-Current Assets FAQs
Is goodwill a fixed asset?
Goodwill is not classified as a fixed asset because it is an intangible asset that has no physical existence.
Is a vehicle an asset?
Yes, a vehicle is an asset and is classified as a non-current asset in the statement of financial position.
Are cars assets?
A car is a depreciating asset and is classified as a non-current asset in the company’s balance sheet.
What are long-term assets?
Long-term assets are those assets that are depreciating over their useful life and cannot be sold within the business cycle.
Is equipment a long-term asset?
Yes, equipment is a long-term asset and is recorded in the section of non-current assets in the balance sheet.
Is land a long-term asset?
The land is a fixed asset and has more life and less liquid, so it is classified as a non-current asset in the balance sheet.
Is prepaid rent a non-current asset?
No, prepaid rent is a current asset.
Are fixed assets non-current assets?
Fixed assets are non-current assets such as PPE (Property, Plant, and Equipment).