Operating Assets Defined

Operating assets are long‐lived assets that are used in normal business operations. They are not held for resale to customers. Investments in operating assets are essential to the success of most businesses. There are three major categories of operating assets: property, plant, and equipment, sometimes referred to as plant assets or fixed assets; natural resources; and intangible assets. Property, plant, and equipment includes land; land improvements, such as driveways, parking lots, fences, and similar items that require periodic repair and replacement; buildings; equipment; vehicles; and furniture. Natural resources, such as timber, fossil fuels, and mineral deposits, are created by natural processes that may take thousands or even millions of years to complete. Companies use up natural resources by cutting or extracting them, so natural resources are sometimes called wasting assets. Intangible assets, which lack physical substance, may nevertheless provide substantial value to a company. Patents, copyrights, and trademarks are examples of intangible assets.

According to the matching principle, the costs of operating assets other than land must be matched with the revenues they help to generate over their useful lives. Allocating these costs to expense is called depreciation for plant assets, depletion for natural resources, and amortization for intangible assets. The cost of land is never depreciated because land is considered to have an unlimited useful life.

Natural resources are usually listed within the property, plant, and equipment category on the balance sheet. Intangible assets are placed in a separate category.

Digby Pitts Strip Mining Partial Balance Sheet December 31, 20X4


Current Assets


$ 16,000

  Accounts Receivable






  Prepaid Insurance


    Total Current Assets


Property, Plant, and Equipment


$ 300,000

  Buildings and Equipment

$ 500,000

  Less: Accumulated Depreciation



  Coal Deposits



  Less: Accumulated Depletion




Intangible Assets





  Less: Accumulated Amortization



    Total Assets