fixedasset

A fixed asset, also known as a tangible asset or property, plant, and equipment (PP&E), is a long-term tangible asset that a business owns and uses in its operations to generate income. These assets are not intended for sale in the ordinary course of business. Examples of fixed assets include land, buildings, machinery, vehicles, furniture, and fixtures.

The cost of a fixed asset includes all expenditures necessary to acquire the asset and prepare it for its intended use. This may include the purchase price, delivery charges, installation costs, and any modifications required. Fixed assets are typically recorded on a company's balance sheet at their historical cost.

Over time, fixed assets lose their value due to wear and tear, obsolescence, or usage. This decrease in value is recognized through a process called depreciation, which is recorded as an expense on the income statement. Different depreciation methods exist, such as straight-line depreciation, declining balance depreciation, and units-of-production depreciation, each allocating the cost of the asset over its useful life in a different way.

Fixed assets are crucial for a business's ability to produce goods or services and generate revenue. Proper management of fixed assets involves tracking their acquisition, depreciation, maintenance, and eventual disposal. Decisions regarding the purchase, upgrade, or replacement of fixed assets significantly impact a company's financial performance and long-term sustainability.