Capital Assets Definition

What are capital assets?

Capital assets are things that a business owns that aren’t cash in the bank — but are assets that the business owns to make money. They can be tangible or intangible. 

Examples of Capital Assets

Examples of capital assets include:

• Land
• Commercial buildings
• Printers
• Computers
• Stocks
• Bonds
• Machinery
• Equipment
• Commercial vehicles
• Physical stores

These are only a few examples of capital assets. Most anything that isn’t cash or inventory but makes or helps a business make money is a capital asset.

Related: Why Is Working Capital Important? Answer = Business Survival

Are capital assets and inventory the same thing?

Capital assets and inventory aren’t the same things. Both are used to make the business money, but the purpose and overall use of the assets are what sets them apart. 

Inventory makes the company money by being sold to the consumer. On the shelf, it’s not worth much. When a customer buys the product, that’s when the business makes money.  

In contrast, capital assets serve to make the business money in the following ways:

• By appreciating in value over time
• By helping the company provide goods or services to the consumer
• By facilitating the manufacture of goods or inventory
• By storing goods
• By enabling the company to continue operations

There are other ways that a business benefits from having capital assets. For example, selling an unprofitable piece of property generates cash for a business. Selling such assets also provides an opportunity for a company to change locations or buy new equipment.

Capital Assets Benefits 

So, what are the benefits of acquiring capital assets? Here are some capital assets advantages:

• Diversifies the assets that the business has on hand
• Provides other avenues for generating cash when needed
• May save the business money in taxes
• Helps the business grow

One capital asset disadvantage is that it’s not in a readily usable form. In other words, they take time to convert into cash. Further, there’s a chance that the money spent on a capital asset could turn out to be a poor investment. Doing proper research ahead of time helps protect entrepreneurs against these types of losses. 

Summary: Capital Assets Definition

Capital assets are things owned by a business that generate money. The difference between capital assets and inventory is that a business sells inventory to consumers; in contrast, it doesn’t sell capital assets to consumers. A business owner benefits from capital assets because they diversify their assets, and it might even save them money on taxes.

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