What distinguishes fixed assets from current assets?

• A. Fixed assets are short-term resources
• B. Fixed assets include cash and receivables
• C. Fixed assets are long-term resources
• D. Fixed assets decrease in value

Answer: (C)

The distinguishing factor between fixed assets and current assets is that fixed assets are characterized as long-term resources. Fixed assets, such as property, plant, and equipment, are expected to provide economic benefits to a company over a period exceeding one year. Their purpose is to support business operations, and they are not intended for immediate sale in the normal course of business.

On the other hand, current assets are typically shorter-term resources, such as cash, inventory, and accounts receivable, that are expected to be converted into cash or used up within one year. This fundamental difference in the duration and purpose of the resources categorizes fixed assets as long-term, hence the choice that states fixed assets are long-term resources is correct.

While it’s true that fixed assets may experience a decrease in value due to depreciation over time, this does not define their nature as fixed assets. Rather, it's a characteristic of their accounting treatment. Fixed assets are designated by their long-term utilization rather than their current valuation or liquidity.