Current assets vs fixed assets
Learn how current and fixed assets differ, with examples and how each appears on your balance sheet.
Published Thursday 23 July 2026
Table of contents
Key takeaways
- Current assets are things you expect to use up or turn into cash within a year, like cash, inventory and money owed by customers.
- Fixed assets are long-term resources you keep and use for more than a year, such as buildings, vehicles and equipment.
- Fixed assets lose value over time and are depreciated, while current assets are not. In Canada, tax depreciation is claimed as capital cost allowance.
- Knowing the split helps you manage day-to-day cash flow and plan longer-term investments with confidence.
What are current assets?
Current assets are the things your business owns that you expect to use up or turn into cash within a year. They keep your day-to-day operations running and cover short-term bills.
Because they can be converted to cash quickly, current assets are a good measure of how easily you can meet near-term costs. You can read more in the glossary entry on current assets.
Common examples of current assets include:
- cash and cash equivalents
- accounts receivable, or money owed by your customers
- inventory you plan to sell
- prepaid expenses, such as an annual insurance policy
- short-term investments that mature within a year
What are fixed assets?
Fixed assets are long-term resources your business owns and uses to operate for more than a year. They're also called non-current assets, and they appear on the balance sheet as property, plant and equipment (PPE).
You buy fixed assets to help your business produce goods and services over time, not to sell them quickly. For a closer look, see the glossary entry on fixed assets.
Common examples of fixed assets include:
- buildings
- land
- vehicles
- machinery
- computer equipment
- furniture
Key differences between current and fixed assets
The main difference comes down to how long you hold the asset and how easily you can turn it into cash. Current assets are short-term and liquid, while fixed assets are long-term and harder to sell quickly.
Here's how current and fixed assets compare across the areas that matter most:
- Liquidity: current assets convert to cash easily, while fixed assets don't
- Time horizon: current assets are used within a year, while fixed assets are kept for the long term
- Depreciation: fixed assets are depreciated over time, while current assets are not
- Purpose: current assets fund daily operations, while fixed assets support production and growth
- Balance-sheet placement: current assets sit at the top, while fixed assets sit under non-current assets
How current and fixed assets appear on the balance sheet
Your balance sheet groups assets so you can see what's liquid and what's tied up for the long term. Current and fixed assets sit in separate sections.
Current assets are listed first, in order of liquidity. Cash comes at the top, followed by accounts receivable, then inventory and other assets that take longer to convert.
Fixed assets appear below, under non-current assets. This is where you'll see property, plant and equipment, usually shown at cost less any depreciation to date.
Depreciation and fixed assets
Fixed assets lose value as you use them, so you spread their cost over their useful life. This process is called depreciation, and you can learn the basics in this guide on what depreciation is.
Current assets are not depreciated, because you expect to use or sell them within a year. Land is the exception among fixed assets, since it doesn't wear out and so isn't depreciated.
In Canada, tax depreciation on eligible fixed assets is claimed as capital cost allowance (CCA) rather than the depreciation figure in your accounts. You can find an overview in this guide on capital cost allowance for small businesses.
Why the difference matters for your business
Telling current and fixed assets apart helps you balance short-term liquidity against long-term capacity. Current assets show whether you can cover the next few months, while fixed assets show the resources driving future growth.
The split feeds directly into your working capital, which is your current assets minus your current liabilities. Healthy working capital means you can pay bills, buy stock and handle surprises, and you can dig deeper in this guide on what working capital is.
When you plan, you use current assets to manage cash flow and fixed assets to weigh bigger investments. Tracking both gives you a clearer picture for confident decisions.
Track your assets with confidence using Xero
Keeping your current and fixed assets organized makes it easier to see where your money sits and plan your next move. Xero brings your balance sheet, depreciation and cash flow together in one place, so you can get one month free.
FAQs on current assets vs fixed assets
Here are answers to some frequently asked questions about current assets vs fixed assets.
Is a car a fixed asset or a current asset?
A car your business owns and uses for more than a year is a fixed asset. It would only count as a current asset if you're a dealer holding vehicles as inventory to sell.
Are fixed assets considered current assets?
No, fixed assets are non-current because you hold them for longer than a year. Current assets are the short-term items you expect to use or convert to cash within a year.
Do current assets depreciate?
Current assets don't depreciate, since you use or sell them within a year. Inventory can be written down if its value drops, but that's a separate adjustment from depreciation.
What is the main difference between current and fixed assets?
The main difference is time and liquidity: current assets turn into cash within a year, while fixed assets are held for long-term use. Fixed assets are also depreciated, whereas current assets are not.
Related Terms
Learn more about current and fixed assets
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.