Capital Asset
It is defined as any asset that can be turned into cash possessed by the owner, but it is to be mentioned that unlike other asset capital it is not easily turned into cash. So capital assets are low liquidated assets. This asset also contribute the business for generating profit for more than 1 year. Some common examples of capital asset include
- Plants and machinery
- Land and Buildings
- Goodwill
- Patents
- Mutual funds
- Shares
- Vehicles etc.
Capital assets include all kind of assets like tangible asset, intangible asset, circulating asset, fixed asset, physical asset, nonphysical asset etc.
Some things that are not capital asset
- Readily used assets like stock in trade, consumer goods, raw materials etc are excluded from capital assets
- All personal belongings are excepted from capital assets, for example jewelry, motor vehicle, furniture etc
- Rural agricultural lands
- Some special bonds according to government acts. (like gold bond 1980, Special bond 1991 etc)
Uses of Capital Asset
Capital asset is literally money, but it is used only is the worst case scenarios. If a business is in the brink of bankruptcy, this assets can be turned to cash. Moreover these assets are eligible for a capital gain over time for example land, jewelry (non-personal), shares etc.
