Examples of Fixed Assets

Written By:
Adiste Mae

For those of you who are wondering what fixed assets are, put simply: a fixed asset is an asset that a business has bought in order to use it as part of its production process when it comes to making and distributing the goods and services the business offers.

A fixed asset is used over the long term which means that these assets are used for a period of more than 12 months.

A fixed asset is considered as a non-current asset which means that these assets possess a useful life that spans a time frame that is longer than one year.

Examples of a fixed asset are the property, plant and equipment (PPE or PP&E) figures you see recorded on the company’s financial statement, particularly in its balance sheet.

A fixed asset is also known as a tangible asset since fixed assets tend to be assets you can see, feel or interact with physically.

Below is a short list on items that are considered as a fixed asset:

•       Land
•       Building
•       Machinery
•       Office furniture
•       Company vehicles such as company trucks and cars

It should be noted that a fixed asset is not liquid which means that it cannot be easily sold to be readily converted into cash.

A fixed asset is also not fully consumed by a company within the year that it was purchased.

In certain cases, a fixed asset is not sold or consumed at all by the business and instead, it is used as a means to produce the services and goods the business offers to its customers and its target market.

A fixed asset that is tangible goes through a process called depreciation as time goes on.

Depreciation is what will reduce the cost of the fixed asset that has been initially recorded.

In most cases, tangible assets such as equipment, machinery and even buildings go through depreciation.

Despite it being true that tangible assets do get depreciated, land which is also a tangible asset, does not depreciate since the usage of land to put a building on for example does not deplete the land’s value over time not unless the land contains natural resources which can diminish when repeatedly used over a certain period of time.

Examples

Let us take a look into what an example of a fixed asset would be when a company is a producer of toys that they also sell directly to their market.

Say that the toy company bought a brand new office building that cost them $5 million in addition to the equipment and machinery they also needed which was worth $500,000 in total.

In projections that were made, the company foresees being able to use the equipment, machinery and building for the next five years.

It is these assets, from the equipment to the machinery and to the building that is considered as a fixed tangible asset since they possess a physical form and existence while having a useful life that is longer than a single year and at the same time, these assets are being used as a means to generate additional revenue for the toy company.