Similarities & Differences Between Plant Assets And Current Assets With Relationship
Plant Assets VS Current Assets
Some Current Assets such as Cash and Cash Equivalent and Accounts Receivable are converted into cash very quickly while plant assets are used in the business for more than year, so
usually these are converted into cash when these are no longer useful for the business i.e., after fully depreciation charged on these assets, then these are sold out in the market for cash.
Examples of plant assets include Land & Building, Machinery, Vehicle, Office Equipment, etc. Examples of current assets consist of Cash & Cash Equivalent, Accounts Receivable, Inventory, Prepaid Expenses, Investments, etc.
Similarities Between Plant Assets And Current Assets
(a) Both are assets for the business.
(b) Both are used in the business to run daily business’ operations.
(c) Both are recorded on balance sheet as Permanent Accounts.
Relationship Between Plant Assets And Current Assets
There is a strong positive relationship between these two Types of Assets as current assets are used to purchase plant assets e.g., the cash is paid to purchase machinery, etc. Plant assets are used to receive cash from customers as plant assets make possible for us to operate business’s operations and due to the profitable activities of the business’ operations, revenue e.g., Sales are generated i.e., we received cash from customers for cash sales made or we created Accounts Receivable when goods sold on account and cash collected from our customers when they pay to us for goods sold to them on credit or on account.
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