Natural resources may be reported under either plant assets or their own separate category on the balance sheet.Group of answer choicesTrueFalse

The statement is True.

Explanation

Natural resources, such as minerals, oil, and timber, can indeed be classified in one of two ways on a company's balance sheet.

1. Plant Assets: When natural resources are utilized for their productive capacity—similar to physical assets like machinery and buildings—they can be reported under plant assets. This is due to their use in the operational processes of the business, much like other long-term assets.

2. Separate Category: Alternatively, companies may choose to report natural resources in their own distinct category, separate from plant assets. This approach emphasizes the unique characteristics of these resources, particularly their finite nature and the method of their extraction or harvesting.

The choice between these two classifications can depend on the company's accounting policies, the nature of the resources, and how they are used within the company’s operations. Proper classification is vital for understanding a company's financial position and operational capabilities. Companies must also adhere to applicable accounting standards when making this classification.