11 Property, Plant, & Equipment

Property, Plant and Equipment (PPE) are long-lived physical assets that a company uses to create value. The words property and plant are outdated words that are not used often, but they just mean land and buildings. You may also hear the phrase capital assets which means the same thing: land, buildings, and equipment. Capital assets is a common term in business and finance settings, but these assets are classified as PPE on the Statement of Financial Position. For the purposed of financial accounting, these assets are PPE.

PPE includes more than basic land, buildings, and equipment. You might see machinery used in a factory, computers used in office or product design, office buildings, factories, furniture like desks or chairs, tractors, cars, ice cream trucks, grain elevators, and other farming equipment included in PPE. PPE assets are really interesting because they are uniquely linked to the company’s business model. That is, PPE lets companies create value for customers and shareholders: a company’s very reason for existing!! Think about it: how could a company make inventory or perform services without machinery, buildings, computers, etc.? This section is all about value-creating assets, and it promises to be absolutely fascinating 😊