A long-term asset is one that is consumed or used over a number of accounting cycles, from more than one year to 40 years.
While long-term assets are purchased either through mortgages, leases, or cash, that by itself is not an expense. That would be too easy. Instead, because of the matching principle, the asset is depreciated over its useful lifetime by charging a portion of the purchase price against revenue in each accounting cycle (e.g. quarter or year). That non-cash "expense" is associated with using the asset to generate revenue in that cycle.
The purchase of long-term assets usually shows up on the cash flow statement in the Plant, Property, & Equipment line item in the Investing section of the statement.
Recent Mentions on Fool.com
- How The Pyramid Approach Can Support Your Retirement Planning
- How Warren Buffett Defied Popular Thinking on Risk
- Breaking Down Cisco's $40 Billion Investing Spree
- Flight to Yield After the Fed Statement Pushes Dow Jones Higher Today
- Why the Market Is Holding Its Breath
- Financials Lead the Dow Jones Today as Inflation Surprises