Current vs fixed assets
Learn what current and fixed assets are, how they differ and why the split matters for your business.
Published Thursday 23 July 2026
Table of contents
Key takeaways
- Current assets are resources you expect to use or turn into cash within 12 months, like cash, inventory and accounts receivable
- Fixed assets, also called non-current assets, are long-term resources you keep for more than a year, like buildings, vehicles and machinery
- The two differ in time horizon, liquidity, purpose, balance-sheet placement and whether they depreciate
- Knowing the split helps you manage working capital, plan for growth and handle depreciation at tax time
What are current assets?
Current assets are the resources your business expects to use up or convert into cash within 12 months. They keep your day-to-day operations running and cover your short-term costs.
These are the assets closest to cash, so they show how easily you can meet upcoming bills and obligations. Common current assets include:
- cash and cash equivalents, such as money in your business bank account
- inventory you plan to sell
- accounts receivable, or money customers owe you
- prepaid expenses, like insurance you have paid in advance
- short-term investments you can sell quickly
What are fixed assets?
Fixed assets sit at the other end of the scale. They are the long-term resources your business owns and uses to operate, rather than to sell within the year.
You will also see fixed assets called non-current assets. On the balance sheet, they often appear under a heading called property, plant and equipment (PP&E). Common fixed assets include:
- buildings and land
- computer equipment and software
- furniture and fittings
- vehicles
- machinery
Current vs fixed assets: key differences
Current and fixed assets both add value, but they behave very differently. The clearest way to tell them apart is to compare them across a few dimensions:
- Time horizon: current assets are used or converted within 12 months, while fixed assets are held for more than a year
- Liquidity: current assets are easy to turn into cash, while fixed assets are harder to sell quickly
- Purpose: current assets fund daily operations, while fixed assets build long-term capacity
- Balance-sheet placement: current assets are listed first, with fixed assets below them
- Depreciation: fixed assets lose value over time and depreciate, while current assets do not
How current and fixed assets appear on the balance sheet
Your balance sheet groups assets by how quickly you can turn them into cash. This order makes it easy to see what you can access now versus what is tied up for the long term.
Current assets appear first, listed from most to least liquid, so cash sits near the top and inventory further down. Fixed or non-current assets sit below, since they take longer to convert. Together they make up your total assets and feed into your net asset value.
Depreciation: how fixed assets lose value
Fixed assets lose value as you use them, and depreciation is how you spread that cost across an asset's useful life. Current assets do not depreciate, because you use or sell them within the year.
Most fixed assets depreciate, though land is the usual exception because it does not wear out. Spreading the cost gives you a more accurate picture of your profit each year. For a fuller explanation, read the Xero guide on what depreciation is.
Depreciation rules for tax in New Zealand are set by Inland Revenue, so check the Inland Revenue guidance on depreciation for current rates and methods. If an asset costs NZ$1,000 or less, you may be able to write it off in full in the year you buy it, under the low-value asset threshold that has applied since 17 March 2021.
Why the difference matters for your business
The split between current and fixed assets tells you two different things about your business, so it pays to read both. One speaks to your short-term health, the other to your long-term growth.
Current assets show your short-term financial health. Comparing them with your current liabilities gives you your working capital, the cash cushion that keeps you paying bills and staff on time.
Fixed assets show your long-term capacity to grow and produce, and they shape your tax, since depreciation is often a deductible expense. Getting the classification right keeps your reporting accurate and your decisions grounded.
Track your assets with Xero
Keeping current and fixed assets organised is far easier when your numbers update in one place. That way you always know what you own and what it is worth.
With Xero accounting software, you can record your assets, run a balance sheet in a few clicks and see how your working capital is tracking in real time. Ready to get your books in order? Try Xero and get one month free.
FAQs on current vs fixed assets
Here are answers to some frequently asked questions about current vs fixed assets to help you classify what your business owns.
Are fixed assets current assets?
No. Fixed assets are long-term resources you hold for more than a year, while current assets are used or converted to cash within 12 months.
Is a car a current or fixed asset?
A car your business owns and uses to operate is a fixed asset, because you keep it for more than a year. A car held by a dealer to sell is inventory, which is a current asset.
Do current assets depreciate?
No, current assets do not depreciate. You use or sell them within the year, so their cost is not spread over time the way it is for fixed assets.
Where do current and fixed assets appear on the balance sheet?
Current assets are listed first, ordered from most to least liquid. Fixed or non-current assets appear below them.
What counts as a fixed asset in New Zealand?
A fixed asset is a long-term item you use to run your business, such as buildings, vehicles, machinery or equipment. Inland Revenue sets the depreciation rules for these assets.
Related terms
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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.