A fixed asset is a long-term tangible asset that a corporation owns and utilises to create income in its operations. Fixed assets provide long-term financial advantages, have a useful life of more than one year, and are categorised on the balance sheet as property, plant, and equipment (PP&E).
Here are some examples of fixed assets:
Land
Buildings
Machinery
Equipment
Vehicles
Furniture
Computer equipment
Software
Intangible assets that have a useful life of more than a year (for example, patents and copyrights)
Fixed assets are susceptible to depreciation, which is a way of dispersing an asset's cost over its useful life. Depreciation assists in matching the asset's cost to the revenue it generates during its lifetime.
Fixed assets are vital for organisations because they help produce money and increase operational efficiency. They may also be used as loan collateral, which can assist firms in raising financing.
Three main types of fixed assets:
Property:
Land, buildings, and other constructions are examples of property.
Plant:
Machinery, equipment, and other physical assets employed in the production of goods or services are referred to as plant.
Equipment:
Furniture, trucks, and other assets utilised in the day-to-day operations of a firm are examples of equipment.
The sorts of fixed assets that a company has will differ based on the industry and the nature of its activities. A manufacturing company, for example, will most likely have a lot of machinery and equipment, but a retail company will most likely have more furnishings and automobiles.
Fixed assets are an important component of a company's financial sheet. They can contribute to the company's financial health and make it more appealing to investors. Businesses may make better financial decisions regarding their assets if they understand the various categories of fixed assets and how they are depreciated.
