A capital asset is a type of asset that cannot be easily traded with cash, as what usually happens in an ordinary business operation. Its main role in businesses is to generate profit that will span a time frame of one year or longer. Examples of assets falling under this category are real estate, heavy machinery, and others that contribute directly to the core of the business operations. They are not usually exchanged for cash unless they are being traded for a newer model or a worst case scenario arises such as bankruptcy.
One of the more common types of capital assets is real estate. This covers the site in which the business operates. For example, a car manufacturing company will own and operate a car manufacturing plant that produces the automobiles under the company brand. The entire area that encompasses the plant will be continually used presumably for years or even permanently. The building and the land are considered as key assets in the business operations and therefore will not be sold unless it becomes a necessity for the continued lifespan of the company.
Another type of capital asset is heavy machinery and equipment. These heavy-duty devices can be used continually for many years, until such time that they are no longer usable or have to be replaced with a more advanced technology. They are mainly utilized by companies that specialize in the construction of tangible assets (such as cranes and concrete makers), harvesting of raw materials (such as farming equipment and drilling rigs), the manufacture of products (such as printing machines and ovens), and delivery of services (such as computers and vehicles).