Fixed assets refer to tangible assets in the long term for usage in a company’s operations. As they have a useful life of more than one year, fixed assets provide the company with long-term financial benefit. Fixed assets are also called capital assets and on the balance sheet are denoted by the term Land, Plant and Equipment (PP&E). Fixed assets are non-current assets; meaning does not easily convert to cash.
Fixed assets are vital to any business. Investors carefully look at them for determining is it feasible to invest in a company, in addition to being used to help a business raise revenue. For instance, to calculate fixed assets’ efficiency in generating sales, the fixed asset turnover ratio is used.
Examples of Fixed Assets
- Land
- Machinery
- Facilities and Buildings
- Vehicles (trucks, company cars, forklifts, etc.)
- Furniture
- Tools and equipment
Critical features of Fixed Assets
- They are the non-current assets having a useful life of more than one year.
- Fixed assets are depreciable, which means their value keeps on decreasing with time except for land.
- Fixed assets are used in the business purpose for providing long-term financial gains.
Types of Fixed Assets
- Tangible assets: These are those assets which can be physically seen or felt. Examples of tangible assets are building, property, and machinery.
- Intangible Assets: Assets which cannot be physically seen or felt are known as intangible assets. Examples of intangible assets are intellectual property, brand awareness, goodwill, such as copyrights, patents, trademarks.
What is a Fixed Asset Register?
Fixed Asset Register includes a list of all the fixed assets held by a corporation. The goal behind retention is to keep track of asset book value and depreciation. It is done relatively to identify each purchase that can serve the objective at the time of fixed asset verification.
Fixed assets register helps in knowing various details like purchase date, cost, salvage value, specifications, depreciation rates, etc.
Advantages of maintaining Fixed Asset Register
- Fixed asset register helps to comply with statutory criteria.
- It tracks the asset and classifies it.
- It helps in providing asset protection, primarily for the prevention of theft.
- It helps in annual Estimate of Depreciation.
- Helps to track Asset Gross Book Value and Net Value.
- Assists in the conduct of asset auditing and verification of assets.
- It assists in calculating the cost of repairs and maintenance.
- It assists in forecasting the potential allocation of capital into fixed assets.
- Helps in determining valuations for companies.