Craig, the owner of a landscaping business, regards equipment as fixed assets. What does this mean?

• A. Fixed assets refer to the process of spreading the cost of an asset and accounting for its depreciation over time.
• B. Fixed assets are assets acquired for the long-term benefit of the business. They extend beyond a year.
• C. Fixed assets are assets that can be converted into cash quickly (within a year).
• D. Fixed assets are current assets.

Answer: (B)

Fixed assets are assets acquired for the long-term benefit of the business and extend beyond a year. For Craig, his landscaping equipment—mowers, trucks, trailers—is used over many years to run operations, not bought to be sold in the near term. That long-term use means these items are capitalized on the balance sheet and depreciated over their useful life, reflecting their gradual consumption as they help generate business revenue.

This differs from current assets, which are expected to be converted to cash or consumed within a year (like inventory or cash). It also isn’t just about depreciation itself—the concept is about the purpose and time horizon of the asset.