Fixed assets are the long-term tangible assets that are used by businesses in generating income. Fixed assets provide the firm with long term financial gain as they have a useful life of more than one year. They are also known as capital assets and are denoted by the term Property, Plant, and Equipment in the balance sheet. These assets cannot be easily converted into cash.
Types of Fixed Assets
- Tangible Assets: Tangible asset is an asset that has a physical existence. Tangible assets examples are land, buildings, and machinery.
- Intangible Assets: An intangible asset is an asset that doesn’t possess a physical existence. Brand recognition, intellectual property, goodwill, and such as copyrights, trademarks, and patents are all examples of intangible assets.
Fixed Asset Formula
|Net Fixed Assets = Total Fixed Assets – Accumulated Depreciation|
Examples of Fixed Assets
The following are examples of fixed asset accounts:
- Buildings: Includes all facilities owned by the entity.
- Computer equipment: Includes all types of computer equipment, such as servers, desktop computers, and laptops.
- Computer software: Usually only includes the most expensive types of software.
- Construction in progress: This is an accumulation account in which are recorded the costs of construction. Once an asset (usually a building) is completed, the balance is moved to the relevant fixed asset account.
- Furniture and fixtures: Includes tables, chairs, filing cabinets, cubicle walls, and so forth.
- Intangible assets: Includes all non-tangible assets, such as the costs of patents, radio licenses, and copyrights.
- Land: Includes the purchased cost of land, and may also include the cost of land improvements (which are otherwise recorded in a separate account).
- Leasehold improvements: Includes the costs incurred to renovate leased space.
- Machinery: Typically refers to production machinery.
- Office equipment: Includes copiers and similar administrative equipment, but not computers (for which there is a separate account).
- Vehicles: Company cars, trucks, and more specialized moving equipment, etc.