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Fixed assets – what are they and how to account for them?

Fixed assets are one of the basic categories of assets in an enterprise that are used to conduct business and have a certain lifespan. They are items that have been purchased by an enterprise and will last for at least one year.

What are fixed assets? Definition of the term

Fixed assets are objects of a permanent nature that are used in business activities and have a certain durability. Two types of fixed assets can be distinguished: intangible and tangible. Intangible fixed assets are those that are not visible to the naked eye, such as copyrights, licenses or patents. Tangible assets, on the other hand, are those that are visible and can be touched, such as buildings, machinery or furniture.

What counts as fixed assets?

Fixed assets include items of a permanent nature that are used in business activities and have a certain durability. This can include buildings, machinery, tools, cars, furniture or office equipment. Fixed assets can also be intangible, such as copyrights, licenses or patents.

How to account for fixed assets?

Fixed assets are recorded in the company’s books and are subject to depreciation deductions. Depreciation write-offs are the amounts that must be deducted from the value of a fixed asset each year to account for wear and tear and impairment. The value of a fixed asset after depreciation is called depreciated value.

Fixed assets – practical examples

The most common fixed assets include real estate, machinery and equipment, means of transportation, furniture and equipment, tools and other equipment, as well as other fixed assets. All of these assets are invested to create or upgrade a product or service that is offered to the market.

As for real estate, it can include buildings, plots of land, land, structures and other fixed assets. Machinery and equipment include production machinery, data processing machines, printers, copiers, information systems and many others. Transportation assets include automobiles, aircraft, ships, trains and other vehicles. Furniture and equipment includes things like chairs, tables, desks, cabinets, hangers, racks, etc. Tools and other equipment can include hand tools, machinery and equipment that are used to perform production work, as well as machinery for construction and repair.

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