Major Differences between Inventory and Fixed Asset
Most companies worldwide have a certain amount of inventory and fixed asset. In most cases, both inventory and fixed assets are treated as asserts whereas it’s quoted as different in financial statements. For companies in search for funding, fixed assets are analyzed carefully by banks and government bodies
Companies treat machinery real estate holdings fixtures and buildings as fixed assets. However most fixed assets loose value over time. Fixed assets also can not be converted into cash. Inventory at a factory or manufacturing facility during the running of business is a fixed asset.
Most of the companies treat cash, government securities etc. which can be converted into cash within a year as current assets. For small business organizations, current assets come as the biggest part which can be made into cash. Current Assets are also called as a liquid asset by some companies. As inventory in a company gets sold out in due course it can be considered as a current asset.
Due to the fact that fixed assets have certain life companies depreciate the cost over a period of time. Companies usually reduce the value of machinery and equipment over a period of time as depreciation. In a financial statement also the original cost and the current value is also depicted as a price of the item.