Assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment.

Examples of fixed assets include land, machinery, vehicles, furniture, computer equipment, buildings, and other equipment.

Fixed assets differ based on a company’s business operations.

Fixed assets are items that a company plans to use over the long term to help generate income.

Fixed assets are most commonly referred to as property, plant, and equipment.

Current assets are any assets that are expected to be converted to cash or used within a year.

Noncurrent assets, in addition to fixed assets, include intangibles and long-term investments.

Fixed assets are subject to depreciation to account for the loss in value as the assets are used, whereas intangibles are amortized.

Understanding Fixed Assets

A company’s balance sheet statement includes its assets, liabilities, and shareholder equity.

Assets are divided into current assets and noncurrent assets, the difference of which lies in their useful lives.

Current assets are typically liquid, which means they can be converted into cash in less than a year.

Noncurrent assets refer to assets and property owned by a business that are not easily converted to cash and include long-term investments, deferred charges, intangible assets, and fixed assets.

Companies purchase fixed assets for any number of reasons including:

1) The production or supply of goods or services

2) Rental to third parties

3) Use in an organization

Fixed assets lose value as they age. Because they provide long-term income, these assets are expensed differently than other items.

Tangible assets are subject to periodic depreciation while intangible assets are subject to amortization.

A certain amount of an asset’s cost is expensed annually. The asset’s value decreases along with its depreciation amount on the company’s balance sheet. The corporation can then match the asset’s cost with its long-term value.