Question

Question: What characteristics of a plant asset make it different from other assets?

Short answer

Plant assets are different from other assets as it is used in operations and are long-lived assets.

Step-by-step solution

Plant assets

Plant assets are tangible long-lived assets (the useful life of more than one financial year) used to produce or sell products and services. Plant assets are also known as property, plant, and equipment (PP&E) assets or fixed assets.

Plant assets are used in operations

This makes plant assets different from other assets like inventory that is held for sale and not used in operations. For example: - A company that purchases a computer to resell it reports it on the balance sheet as inventory. If the same company purchases this computer to use in operations, however, it is a plant asset.

Plant assets are long-lived tangible assets

The second important feature is that plant assets have useful lives extending over more than one accounting period. This makes plant assets different from current assets such as supplies that are normally consumed in a short period after they are placed in use.