Commentary

B2.203 Distinction between fixed and current assets

Business tax
Business tax | Commentary

B2.203 Distinction between fixed and current assets

Business tax | Commentary

B2.203 Distinction between fixed and current assets

The sum which is obtained on the disposal of a fixed asset is not a trade receipt, but where an asset which is part of the circulating capital of a business is disposed of, the sum received for it is a trade receipt. Accordingly, it is necessary to distinguish between fixed capital and circulating capital so that the calculation of trading profits can be carried out accurately, and any capital element is eliminated from this figure.

An asset which is a part of the fixed capital of a business is one which is kept and used in the business, usually on a long term basis, with the object of earning revenue. For example, manufacturing equipment and office buildings would be classed as fixed capital assets.

An asset which is a part of the circulating capital, usually referred to as a current asset, is one which

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