Who does not use furniture in Singapore? Everyone does, right? Furniture is pretty much present everywhere whether it’s our schools, colleges, universities, offices, or homes.When people look at furniture, they often get questions in their mind that is furniture an asset? If yes, then is furniture a long-term asset? There are a lot of such questions popping up in your mind and we are here to clear them for you.
In this article, we will tell you everything about furniture and assets with complete detailed information in a very simple, easier, and understandable manner.
The Definition of Asset
Let’s start with the definition of an asset as it will make it easier for you to grasp the rest of the concepts.
“An asset is defined as any valuable thing or resource that can be converted into cash. It is anything that can give you economical/financial benefit in the future or during the current time”.
Assets are owned by everyone be it governments, businesses, individuals, and non-profit organizations, etc.
Now, let’s check out a few examples of assets to make it even easier to understand.
Examples of Assets
The most common examples of assets include various investments, real estate, personal property, office property, copyrights stocks, inventory, and machinery, etc. All of these things can give you economical benefits in the future and help you make money. Thus, they are called assets.
Suppose you bought a building and gave it on rent to a company. Now it generates rent for you every month so it is an asset. Moreover, you can also sell it at a bigger profit margin to gain more money. That is what we call an asset.
Let’s take another example and suppose you have a whole set of machinery and inventory that makes chocolates which you sell in the market to earn a lot of money. Since that machinery and inventory is giving you economic benefit, thus it is called an asset.
In both examples, we can observe one common thing that assets help you make money. So now, we can say that:
“An asset is something that brings money in your pocket”.
Types of Assets
Generally, there are two main types of assets:
- Current Asset
- Non-current Asset
You’re probably wondering in which category does the furniture belong? Is it a current asset or a non-current asset? Before we find that out, let’s discuss what exactly are current and non-current assets.
What exactly are Current Assets?
Here’s what you need to know about current assets.
“Current assets are those assets that can be converted into cash within a year. All the assets that can give you economical benefits in a timespan of one year are termed as current assets. They are also called short-term assets as the owner plans to sell them in one year”.
Examples of Current Assets
The best examples of current assets include cash, inventory, and short-term investments.
Cash is termed as a current asset because cash can be used by a company within a year and can give economic benefits to the owner.
The inventory which the owner plans to sell in a year is also termed as a current asset. It includes any inventory item that can be sold in a year and converted into cash easily like fast-moving consumer goods.
Let’s suppose you have 100 chocolates in your inventory, you can easily sell them in one year and make a profit (convert them into cash). So, we’ll call them a current asset.
If you have any short-term investments that will be converted into cash in one year then all such short-term investments are also termed as current assets.
Let’s suppose you invested in a stock that will give you profit in 1 year and will be converted into cash then it will be called a current asset.
What exactly are Non-Current Assets?
Let’s quickly discuss the non-current assets now:
“Non-current assets are opposite to current assets. All those assets whose useful life extend beyond one year are termed as non-current assets”.
They are also called long-term assets because the non-current assets can give you economical benefits after 1 year.
Examples of Non-current Assets
The most common and general examples of non-current assets include property and long-term investments.
If you have any property, building, restaurant, or shopping mall that can give you economic/financial benefits beyond the timespan of one year then they count as non-current assets.
If you have some long-term investments that offer you economic/financial benefits after 1 year then it is also called a non-current asset.
It could be anything like copyrights, stocks, prize bonds, or trademarks, that can bring you money & value after one year is known as non-current assets.
Is Furniture Long-Term or Short-Term Asset?
Answer: Furniture is a long-term and non-current asset.
As we know everything about current and non-current assets along with all the differences between both. So, let’s use the knowledge we learned above and find out why furniture is a non-current asset.
Why Furniture is a Long Term (Non-Current) Asset?
The definition of non-current assets says that any kind of assets that possess a usable lifespan of more than one year are called long-term (non-current) assets.
The definition of current assets says that they provide economic/financial benefit to you within one year.
Furniture qualifies as a non-current (long-term) asset because it has a lifespan of more than one year. It provides long-term benefits to the company as they use furniture for many years to carry on providing their services.
Have you ever seen an office, home,school, university, or business company selling/throwing out their furniture every year? No! thatrarely happens because the furniture has a life of more than one year and it can be used for more than one year. Perhaps, everyone uses furniture for more than one year.
Now when something (furniture) has a lifespan of more than one year then it is called a non-current and long-term asset because they also have a life of more than one year.
The result of our whole discussion in this article concludes that:
Furniture is a non-current (long-term) asset because it has a useful lifespan beyond 1 year.