fixed assets definition

Fixed Assets Definition, Example and Importance

Fixed Assets Definition – “Assets that are difficulty to convert to cash, such as buildings and equipment”.

These are the long term tangible and non tangible assets that a firm owns and are difficult to convert into cash. These assets are purchased for the productive purpose not for resale. They play an important role in making business processes productive and profitable.

It appears on the Assets side of the Balance Sheet. All the fixed assets are recorded in the books of account on their book value. Then accumulated depreciation is subtracted from the book value. This implies that, with the passage of time, the book value of fixed assets decline.

Fixed Assets Example

To get a clear understanding of Fixed Assets definition, let’s have a look over some of the examples  of fixed assets.

  • Building
  • Land
  • Plant and Machinery
  • Facilities
  • Patents, Copyrights, Trademarks
  • Vehicles
  • Furniture and Fixtures
  • Computer equipment
  • Livestock such as horse, bull, etc.

Related Financial Terms of Fixed Assets

Importance of Fixed Assets

For the smooth functioning of business fixed assets are very important. Without fixed assets such as Land and building, it is impossible to run a business. Secondly, the business environment is very dynamic. New players emerge daily. So, if business have some unique skill, knowledge, they should patent it. Otherwise it won’t be late when they become obsolete from the market. Other assets such as vehicles, computer, plant, machinery, furniture etc results in making the company productive.