Tangible assets are classified into 3 main categories:
- Property, plant and equipment:
- Natural resources
- Land
Property, plant and equipment
Property, plant and equipment is used to classify the purchase of long term assets like equipment, furniture, computers, etc. As we have already mentioned, accounting is a language and the terms used by real life businesses might be different. For instance some businesses might choose to break out property, plant and equipment into office equipment and furniture.
As assets are used to produce revenue, they are expensed to account for the asset use. The term used to recognize the expense for property, plant and equipment is called depreciation.
Natural Resources
Natural resources refer to assets like mineral deposits, oil and gas reserves, coal mines, etc.
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Land
Land is classified separately from other property because land has an infinite life. Land is not consumed or worn out with use. When land is part of a larger purchase, the value of the land must be separated from the total cost.