Toyota Company in Japan Manufacturing Cars and Vehicles then Prepare to sell through their showrooms to Customers So ,,, how Toyota Record Cars in their Books and Report Financial Statements ? 1- Fixed Long Term Assets (Cars) 2- Current Assets (Inventory) 3- Owner Equity 4- Liabilities

the answer is #2 Current Assets (Inventory)

WELL DEFINED BY MR. SHAHZAD YAQOOB. We consider the vehicles Current Assets (Inventory).

Dear Hakim,

Before giving the answer of your Question first you have to know about the exact definitions of different assets.

Definition: A fixed asset is an item with a useful life greater than one reporting period, and which exceeds an entity's minimumcapitalization limit. A fixed asset is not purchased with the intent of immediate resale, but rather for productive use within the entity.  An inventory item cannot be considered a fixed asset, since it is purchased with the intent of either reselling it directly or incorporating it into a product that is then sold.

The following are examples of general categories of fixed assets:

• Buildings
• Computer equipment
• Computer software
• Furniture and fixtures
• Intangible assets
• Land
• Leasehold improvements
• Machinery
• Vehicles

Fixed assets are initially recorded as assets, and are then subject to the following general types of accounting transactions:

• Periodic depreciation (for tangible assets) or amortization (for intangible assets)
• Impairment write-downs (if the value of an asset declines below its net book value)
• Disposition (once assets are disposed of)

A fixed asset appears in the financial records at its net book value, which is its original cost, minus accumulated depreciation, minus any impairment charges. Because of ongoing depreciation, the net book value of an asset is always declining.

A fixed asset does not actually have to be "fixed," in that it cannot be moved. Many fixed assets are portable enough to be routinely shifted within a company's premises, or entirely off the premises. Thus, a laptop computer could be considered a fixed asset (as long as its cost exceeds the capitalization limit).

A fixed asset is also known as Property, Plant, and Equipment.

Definition: A current asset is an item on an entity's balance sheet that is either cash, a cash equivalent, or which can be converted into cash within one year. Examples of current assets are:

• Cash, including foreign currency
• Investments, except for investments that cannot be easily liquidated
• Prepaid expenses
• Accounts receivable 
• Inventory

These items are typically presented in the balance sheet in their order of liquidity, which means that the most liquid items are shown first. The preceding example shows current assets in their order of liquidity.

Creditors are interested in the proportion of current assets to current liabilities, since it indicates the short-term liquidity of an entity. In essence, having substantially more current assets than liabilities indicates that a business should be able to meet its short-term obligations. This type of liquidity-related analysis can involve the use of several ratios, include the following:

• Cash ratio
• Current ratio
• Quick ratio

The main problem with relying upon current assets as a measure of liquidity is that some of the accounts within this classification are not so liquid. In particular, it may be difficult to readily convert inventory into cash. Similarly, there may be some extremely overdue invoices within the accounts receivable number, though there should be an offsetting amount in the allowance for doubtful accounts to represent the amount that is not expected to be collected. Thus, the contents of current assets should be closely examined to ascertain the true liquidity of a business.

So as per your scenario Purpose of Toyota Co is to sell the assets so it will be treated as Stock(Cuurent Asset) of the Co and all this proces is done thorugh SCM that is a system under which Toyota does globally around the world.

The Answer is

The costs you associate with goods that are completely ready for sale to customers, but haven’t yet been sold, are classified as finished goods inventory. For the car manufacturer, this category consists of cars not yet sold to individual dealerships.

The cars are already out of factory and should be considered as Inventory.

its option 2 which is current assets (inventory)

.>>>>>>>2- Current Assets (Inventory) ..........

Toyata Company is a Manufacturing Business in Cars and Vehicles so they will use Cost Accounting to record car.....first they will prepare Cost of goods Manufactured than Cost of Goods sold and in last Income statement.........Car will be used as Merchandise , car can not be used as Fixed asset only those car be used as fixed as which company for own purpose......

Also car can't be Owners equity or liability.....

The Proper Classification 

Assets that acquired to be used in production or for resale or assets produced by the entrerprise for resale are calssified as inventory in the current asset section of balance sheet.