Long-term assets

Definition

Long-term assets are resources owned by a company that provide economic benefits for more than one year. These assets can be either tangible, like machinery, or intangible, like patents.

5 Must Know Facts For Your Next Test

1. Long-term assets are recorded on the balance sheet under non-current assets.
2. Depreciation applies to tangible long-term assets while amortization applies to intangible long-term assets.
3. Examples of tangible long-term assets include buildings and equipment.
4. Examples of intangible long-term assets include trademarks and goodwill.
5. The cost principle requires that long-term assets be recorded at their original purchase cost.

Review Questions

• What is the difference between depreciation and amortization?
• Give two examples of tangible long-term assets and two examples of intangible long-term assets.
• How are long-term assets reported on the balance sheet?

Related terms

Depreciation:

The systematic allocation of the cost of a tangible asset over its useful life.

Amortization:

The process of gradually writing off the initial cost of an intangible asset over its useful life.

Goodwill:

An intangible asset that represents the excess value paid during the acquisition of another company beyond its identifiable net assets.