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A long-term asset account that reports the cost of real property exclusive of the cost of any constructed assets on the property. Land usually appears as the first item under the balance sheet heading of Property, Plant and Equipment. Generally, land is not depreciated.
f a company sells land that it was holding for future use, the company will debit Cash for the amount it receives, credit Land for the amount in the general ledger account that applies to the land being sold, and record the difference as a gain or loss on sale of land.
Since land does not get depreciated, there is no depreciation expense to be recorded up to the date of the sale, nor is there any accumulated depreciation to be removed from the books of the company.
Land is classified as a long-term asset on a business’s balance sheet, because it typically isn’t expected to be converted to cash within the span of a year.
Land is considered to be the asset with the longest life span. Land cannot be depreciated, meaning you cannot account for its cost by gradually reducing its value over its useful life span. As a result, the useful life span of land is considered to be basically eternal. Because land is typically the least liquid asset a business owns, it’s classified as a fixed asset on your balance sheet.
A balance sheet is one of the three major financial statements that a small business will prepare to report on its financial position. The balance sheet lists a business’s assets, liabilities and shareholders equity, at a specific point in time. It gives a snapshot of what a business owns and what it owes to others.
EXAMPLE OF CURRENT ASSETS
Current assets are short-term assets that will be turned into cash within a year. Some examples of current assets include:
Cash
Cash equivalents, like foreign currency, checks that you haven’t yet cashed and money kept in your checking and savings accounts
Marketable securities, like investments that will be sold within a year
Inventory, including finished products and raw materials
Accounts receivable, which includes the money owed to you by clients for recent invoices
Buildings are not classified as current assets on the balance sheet. Buildings are long-term assets categorized under the fixed asset account. Just like land, buildings are long-term investments that a company typically holds onto for several years.
The main accounting difference between land and buildings is that a building’s value is depreciated whereas land is not subject to depreciation.
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