Question
Distinguish between Current Assets and Fixed Assets.
✓
Answer
Difference between Fixed Assets and Current Assets:
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Basis
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Fixed Assets
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Current Assets
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1.
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Nature
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These are long-term resources of a business.
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Thses are short-term resource of a business.
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2.
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Purpose of Holding
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These assets are used to operate the business and to earn profits.
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These assets are realised in cash or consuned during the normal operating of business.
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3.
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Valuation
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These assets are valued at cost less depreciation.
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These assets are valued at cost or net area isable value (market price), whichever is less.
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4.
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Sources of Finance
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These assets are acquired out of long-term funds of the business.
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These assets are acquired out of short-term funds of the business.
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5.
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Subject to Change
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These assets are not usually subject to change.
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These assets are usually subject to change.
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6.
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Profit on sale
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Profit on sale of these assets is capital profit.
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Profit on sale of these assets is revenue profit.
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