Fixed assets, also known as non-current assets, capital assets, or property, plant, and equipment (PP&E), are long-term tangible assets that a company or organization owns and uses for its operations. These assets have a useful life of more than one year and are not intended for sale during the normal course of business. Fixed assets play a critical role in the production of goods and services, administration, or supporting the organization's core activities.
Examples of fixed assets include:
- Land: Plots of land owned by a company, either for production facilities, offices, or future expansion.
- Buildings: Structures such as factories, warehouses, offices, and retail stores that are used for operations, storage, or administration.
- Machinery and equipment: Manufacturing equipment, production lines, vehicles, and other machinery used in the production process or for transportation.
- Furniture and fixtures: Items such as desks, chairs, filing cabinets, and lighting fixtures used in offices or other workspaces.
- Computers and IT equipment: Servers, computers, networking equipment, and other technology assets that support business operations.
Fixed assets are recorded on a company's balance sheet at their historical cost, which includes the purchase price and any additional costs incurred to make the asset operational, such as installation or transportation fees. Over time, the value of fixed assets typically decreases due to wear and tear, obsolescence, or other factors. This decrease in value is accounted for through a process called depreciation, which allocates the cost of the asset over its useful life.
Proper management of fixed assets is crucial for organizations, as it allows them to optimize resource allocation, maintain accurate financial records, and plan for future investments or asset replacements. Fixed asset management typically involves tracking asset location, usage, and condition; calculating depreciation; scheduling maintenance and repairs; and ensuring compliance with relevant laws and regulations.
In summary, fixed assets are long-term tangible assets owned and used by a company or organization for its operations. They include land, buildings, machinery, equipment, furniture, and IT equipment. Fixed assets are recorded on the balance sheet at their historical cost and are subject to depreciation over their useful life. Proper management of fixed assets is essential for optimizing resource utilization, maintaining accurate financial records, and planning for future investments or asset replacements.