Definition of 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
  • Land
  • Computers
  • 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.



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