Fixed Asset: A long-term asset that a company uses in its operations, such as land, buildings, or machinery.
Fixed assets are long-term assets that a company uses in its operations to generate revenue. These assets are expected to provide benefits to the company for more than one accounting period and are not intended for sale or conversion into cash in the near future.
Fixed assets can include a wide range of tangible and intangible assets, including land, buildings, machinery, equipment, vehicles, patents, copyrights, and trademarks. These assets are generally recorded on a company's balance sheet and are reported at their original cost, less any accumulated depreciation or impairment charges.
Fixed assets are essential for many businesses, as they allow companies to produce goods and services more efficiently and effectively. For example, a manufacturing company may invest in machinery and equipment to automate production processes and increase output, while a transportation company may invest in vehicles and infrastructure to expand its delivery capabilities.
Fixed assets are typically depreciated over their useful lives, meaning that their value is gradually reduced over time to reflect their declining usefulness and obsolescence. Depreciation expenses are recorded on a company's income statement as a non-cash expense, which reduces the company's taxable income and increases its net income.
Overall, fixed assets are an important component of a company's operations and are essential for supporting growth and expansion. By carefully managing and maintaining fixed assets, companies can improve efficiency, reduce costs, and increase profitability over the long term.