3 Min. Read Show
March 28, 2019  Land is a long-term asset, not a current asset, because it’s expected to be used by the business for more than one year. Current assets are a business’s most liquid assets and are expected to be converted to cash within one year or less. Because land is one of the longer term investments that a business can own, it is categorized as a fixed asset on a business’s balance sheet. These topics will help you understand why land is classified as a long-term asset: Is Land a Current Asset or Long-Term Asset? What Are the Different Types of Assets? Is a Building a Current Asset? NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks. If you need income tax advice please contact an accountant in your area. Is Land a Current Asset or Long-Term Asset?Land is classified as a long-term asset on a business’s balance sheet, because it typically isn’t expected to be converted to cash within the span of a year. Land is considered to be the asset with the longest life span. Land cannot be depreciated, meaning you cannot account for its cost by gradually reducing its value over its useful life span. As a result, the useful life span of land is considered to be basically eternal. Because land is typically the least liquid asset a business owns, it’s classified as a fixed asset on your balance sheet. A balance sheet is one of the three major financial statements that a small business will prepare to report on its financial position. The balance sheet lists a business’s assets, liabilities and shareholders equity, at a specific point in time. It gives a snapshot of what a business owns and what it owes to others. What Are the Different Types of Assets?There are two main types of assets that are listed on a business’s balance sheet. The main categories of assets are:
Example of Current AssetsCurrent assets are short-term assets that will be turned into cash within a year. Some examples of current assets include:
Example of Long-Term AssetsLong-term assets won’t be converted to cash within a year. Some examples of long-term assets include:
• Land
• Stocks that won’t be sold for
cash in a year
• Copyrights Is a Building a Current Asset?Buildings are not classified as current assets on the balance sheet. Buildings are long-term assets categorized under the fixed asset account. Just like land, buildings are long-term investments that a company typically holds onto for several years. The main accounting difference between land and buildings is that a building’s value is depreciated whereas land is not subject to depreciation. RELATED ARTICLES How are fixed assets ordinarily presented on the balance sheet?Fixed assets ordinarily appear on the balance sheet under assets as property, plant, building and equipment (PP&E) head. Fixed assets have a debit balance and are classified into two types which are tangible and intangible assets.
Which of the following is included in the cost of land?Land. When acquiring land, certain costs are ordinary and necessary and should be assigned to Land. These costs include the cost of the land, title fees, legal fees, survey costs, and zoning fees. Also included are site preparation costs like grading and draining, or the cost to raze an old structure.
What is the amount to be capitalized debited to the land account from this purchase?What is the amount to be capitalized (debited) to the Land account from this purchase? Amounts to be capitalized to Land would be the purchase price of $300,000, $3,000 in brokerage commissions, $10,000 to clear and remove an unwanted building, and $5,000 in delinquent property taxes for a total of $318,000.
What are considered assets in accounting?An asset is anything that has current or future economic value to a business. Essentially, for businesses, assets include everything controlled and owned by the company that's currently valuable or could provide monetary benefit in the future. Examples include patents, machinery, and investments.
|
