What are the characteristics of plant assets? Before explaining the traits of these types of assets, let’s define the term Plant assets. According to an accounting source Wiley, Plant assets are resources with three key main characteristics. They have a definite shape, secondly, all plant assets have a physical appearance and depreciate except for land. The main types of plant assets in the world, namely include Land, Equipment, Property, and buildings.
7 Key Characteristics of Plant Assets
When talking about plant assets and their characteristics. It’s important to remember the key examples of plant assets include; cars, buildings, machinery, equipment, etc. Plant assets are not inventory because they are intended for day-to-day operations of the business throughout its life. They are not for sale but be deposed off after having depreciated when the company wishes to liquidate assets.
1. Plant assets play a key role in the ongoing operations of the business
These are assets any business needs to carry out its daily activities effectively. Plan assets include motor vehicles for transporting goods, buildings, and machines, such as printers and computers.
2. Plan Assets Depreciate
Another major characteristic is that these assets. Depreciate overtime throughout its useful life. Depreciation refers to the cost allocation of an asset to expense through its useful life.
3. Plant Assets Expand productive Resources
Plan assets to increase production and business activities. Through the unity of activity, plant assets such as machinery can be measured in the level of output produced in production. People are important in human resource and especially management. But the output levels of people can not be compared to machines. Most companies buy plant assets to boos and increase productivity and also for efficiency purposes.
4. Every Company Needs Plant Assets
The fourth characteristic is that these have helped so many companies. No company can work effectively without plant assets. And statistics show over a million companies rely on and utilize plant assets. Southwest Airlines alone has invested over 80 percent of there investments in plant assets.
5. Plant Assets Have a Cost And Purchase Price
Key characteristic includes that plant assets have purchase price. These can be freight costs paid by the purchaser to move equipment from the point of sale to the destination. Sales tax which is also considered as part of the total plant assets expenditure and installation costs
6. Plant Assets Are Tangible
They have a physical appearance and can be touched, improved, and depreciated. A key example of plant assets includes; cars, buildings, machinery, equipment, etc.
7. Limited Life Span
Plant assets depreciate hence due to that they can not live forever. This is a more reason companies estimated accumulated depreciation from the time of purchase and depreciation expense to know the cost of maintaining the asset per year. Theoretically the more an asset is used, it becomes an expense and wears out.