Question

Identify the main difference between (a) plant assets and current assets, (b) plant assets and inventory, and (c) plant assets and long-term investments.

Short answer

1. Plant assets are used in the company’s operations and Current assets are the assets which are used for short period.
2. Plant assets are held to perform company’s operations and Inventories are materials which helps in in achieving ultimate goal of resale.
3. Plant assets are used to perform business operations and long-term investments benefit the company for long period.

Step-by-step solution

Assets

Assets are all those resources a business owns or controls that are expected to provide current or future benefits.

(a) Plant assets and current assets

	Plant assets	Current assets
Meaning	Plant assets are tangible assets used in a company’s operations that have a useful life of more than one accounting period.	Current assets are those assets that are held by the business to convert into cash or for use within a short period (within a year).

(b) Plant assets and inventory

	Plant assets	Inventory
Meaning	Plant assets are those assets that are held by the company to perform its operations. These assets are not for resale.	Inventoryis the goal and materials that a business holds for the ultimate goal of resale.

(c) Plant assets and long-term investments

	Plant assets	Long-term investments
Meaning	Plant assets are those assets that a company held to perform its operations for more than one accounting period.	Long-term investmentsare an investment in a company that will benefit the company for many years.