Fixed assets are long-term assets that are held by a business to generate provider-providing goods and services. Fixed assets include tangible assets, such as buildings, land, equipment, and vehicles, as well as intangible assets, such as patents, trademarks, and copyrights.
Fixed assets differ from current assets in that they are not expected to be sold or consumed within a year or less. Instead, fixed assets are expected to provide benefits to the business over the years. As a result, fixed assets are typically recorded on the balance sheet and are depreciated or amortized over their useful lives.
Depreciation for fixed assets is a method of allocating the cost of a fixed asset over its useful life, to reflect the gradual decrease in the asset’s value due to wear and tear, obsolescence, and other factors. Amortization is a similar process used for intangible assets.
Fixed assets are important to businesses because they represent significant investments that can impact the company’s financial position and performance. Managing fixed assets effectively requires careful planning and analysis, including selecting the right assets, tracking their useful lives, and evaluating options for upgrading or disposing of assets when they are no longer needed.
