What is fixed asset ?
Definition of Fixed asset
A fixed asset is a long- term asset of the company. It is a tangible asset usually in the form of property, plant and equipment (PP & E). It is used in production and manufacturing or for investment or rental property to earn profit for the business.
Fixed assets are very important in setting up and profit earning of a business.
Brief Explanation of Fixed asset
Examples of fixed assets:
- Buildings and property
- Plant and equipment
- Furniture and fixtures etc.
Fixed assets need to be tangible. Fixed assets are generally kept for long term and are non-current assets i.e. kept for more than 12 months of time
Non-tangible non-current assets are referred to as fixed intangible assets. They include patents and trademarks etc.
- Fixed assets are dealt in the accounting standard IAS 16 .
- Fixed asset is a main balance sheet item.
- Cost of fixed asset includes it’s purchase price, transport cost, import duties, and any other cost required to bring the asset to it’s working condition.
- Fixed assets are normally revalued annually.
- Fixed assets are depreciated according to the company’s accounting policies.
- Fixed assets determine the financial health of the company.
- Land is one fixed asset that cannot be depreciated.