What are the Different Types of Capital Assets?

Capital assets are holdings that are provide some amount of benefit to the core operation of a business over the long-term and are usually not for sale. Assets of this type may include land, buildings, heavy equipment, and other assets that contribute something directly to the business operation. For this reason, different types of capital assets are generally not sold unless the assets are being replaced with newer makes and models, or the business must downsize operations in order to remain viable.

One of the most common types of capital assets is the real estate that serves as the location for the core business operation. For example, a business that manufactures electronic appliances will own and operate a manufacturing or assembly plant that produces the goods sold under the company name. Both the land and the buildings that house the manufacturing effort would be considered key assets for the ongoing operation of the business from one year to the next, and would not be offered for sale as long as the assets are needed for the continued production effort. Should the company choose to transfer the production functions to another location, then the buildings and the land may be sold as a means of removing what is no longer a useful asset from the company accounting.

Machinery and heavy equipment are also examples or types of capital assets that businesses may hold for a number of years. This is especially true for companies that engage in activities requiring a range of heavy equipment, such as construction or oil exploration. In this scenario, the capital assets are held until they are either replaced by newer equipment or the company undergoes a merger that requires the liquidation of some of the duplicated assets held by the merged operations.

For the most part, all types of capital assets contribute to the business operation and help the owner generate some sort of revenue that hopefully yields a profit at some point. For this reason, capital assets are not easily sold as long as the business is thriving. Typically, the assets are only sold when they are no longer needed, either due to a merger, a shutdown, or a replacement. In some cases, a company may consider selling one or more capital assets in order to avoid bankruptcy, often choosing to combine operations that were once housed in a specific location with another plant or location, making it possible to sell the now-abandoned property and use the proceeds to keep the company afloat during a difficult economic period.