Long Term or Fixed Assets: Assets that you don’t intend to sell or convert to cash in one fiscal year is known as long term or fixed assets. The types of Long Term and Fixed Assets are
Tangible Assets: Those assets that you can see physically are known as tangible assets. Plant, property and equipment come in this category. This means land, buildings, plant, machinery, equipment, computers all these are fixed assets. Gold is also a fixed asset.
Non Tangible Assets: Assets that have no physical appearance and yet are of significant value are known as non tangible assets. Stocks, bonds, mutual funds, Long term investments, pension and insurance schemes all these are non tangible assets.
The basic difference between Current and Fixed Asset is depreciation. While Current assets do not depreciate, most fixed or long term assets depreciate. For example ready cash, inventories; short investments do not depreciate because they have a short life span.
Long term assets such as PPE depreciate over the years due to wear and tear and upkeep. So these assets come under expense over a period of time. Therefore there is a decrease in net income and taxable income becomes less. Therefore you get tax benefits through depreciation.
However fixed assets such as land and gold do not depreciate. Even if the cost becomes less the value never decreases because they have an indefinite life span. This rule does not apply to gold ornaments.
In the balance sheet both current and long term assets show up. Usually current assets figure on the top because it is ready cash. Long term assets cannot be easily converted into cash and hence feature a little down in the balance sheet. It is necessary to keep updating both current and fixed assets as and when you can.