Future Business Leaders of America (FBLA) Accounting Practice Test

Which of the following is a characteristic of a plant asset?

1. It is always liquid

2. It is a long-term tangible asset used in operations

3. It is always held for investment purposes

4. It includes only furniture and fixtures

The correct answer is: It is a long-term tangible asset used in operations

A plant asset is defined as a long-term tangible asset that is used in the operations of a business to produce goods or services, such as buildings, machinery, and equipment. These assets are essential for conducting business activities and generating revenue over an extended period. In this context, the characteristic of being a long-term tangible asset highlights the physical nature of these assets and their use in the business operations, distinguishing them from current assets or investments that may not have the same direct role in production or service delivery. The other options highlight misconceptions regarding plant assets. While liquidity is important for current assets, plant assets are not inherently liquid; they require time and effort to convert into cash. Furthermore, although some plant assets can be held for investment purposes, the primary definition aligns with their role in operations rather than as purely investment assets. Lastly, plant assets encompass a broader category than just furniture and fixtures; they include various types of equipment and facilities critical for business functions.