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Accounting for Long-Term Assets

Most businesses, no matter their size, invest in long-term assets. Long-term assets include physical assets as well as assets without a physical substance. Long-term physical assets are also referred to as capital assets, plant assets or fixed assets; and include property (land and natural resource properties), plant (buildings, offices, factories and warehouses), and equipment (machinery, furniture, and tools). Long-term non-physical assets are often referred to as intangible assets, and include items such as goodwill

In accounting, the matching principle requires that the cost of any long-term asset is allocated to different accounting periods over its useful life. We call this allocation of costs, generally, "amortization." Amortization is a special concern when accounting for long-term assets. 

Depreciation: Depreciation is the term used specifically for the amortization of property, plant and equipment.

Depletion: Depletion is the term used specifically for the amortization of natural resource properties.

Amortization: Amortization traditionally refers to the amortization of costs for intangible assets. It is no used more generally to include depreciation and depletion. 

Categories within Accounting for Long-Term Assets

Intangible Assets

Postings: 42

Intangible assets have value based on the rights and privileges granted to the company using them, such as patents, copyrights, trademarks, trade secrets, franchise or license agreements, computer software, goodwill, and some development costs.

Natural Resources

Postings: 3

Natural resources are assets that are measured after acquisition based on depletion.

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Net asset value, rate of return, and mutual fund investment strategies

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Long-Term Asset

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Why are retained earnings not considered an asset of the firm?

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Expected return on a three-asset portfolio; Hennessy's portfolio risk

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Accounting problems and questions

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Asset Securitization

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