No, machinery is not a current asset for accounting purposes. A current asset is any asset that will provide an economic value for or within one year. Machinery is part of the property, plants, and equipment, or PP&E, account on the balance sheet. PP&E has a useful life of longer than one year, so PP&E, machinery included, is the list as a non-current asset on a company’s balance sheet.
Is Machinery a Current Asset? FAQs
No, only those machinery items whose fair market value can be realized within one year are classified as current assets. All other machinery items should be reported as long-term assets on the balance sheet.
A current asset is any asset that will provide an economic value for or within one year.
Machinery, in the context of accounting, refers to any kind of equipment used in production and/or business operations that has a useful life greater than one year. Examples include manufacturing equipment, office equipment, vehicles, computers, and machines used in service-related businesses.
Yes, repair and maintenance costs associated with machinery should be reported separately on the balance sheet. These expenses are typically expensed as the cost is incurred and not capitalized as part of the asset value.
The most common accounting method used for reporting company machinery assets is depreciation, whereby an estimated useful life of each machine is determined and depreciation is calculated based on the number of years it will be used. Companies may also choose to use the straight-line or double-declining balance method for calculating depreciation expenses. Each method has its benefits and drawbacks, so companies should consult with their accountant to select the most appropriate accounting method.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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