Fixed assets refers to those holdings of company which will be there with company for a long period of time usually ranging from 1 year to 20 years and they are generally used for the production of other goods and services which are then sold by the company for profit and hence in simple words fixed assets are those which will be there with company for a long period of time and they help the company in making sales which in turn helps the company in making profits and generating wealth for its shareholders. Given below are some examples of fixed asset –
- Land – Land is something on which anything can be done if you have it and you have all the papers which certify that you are the real owner of land then you can build factory or warehouse, shed, office etc…, and hence it is one of the most important fixed asset because of its multiple use and also it always appreciates and never depreciates in value.
- Plant and Machinery – It is another important fixed asset because it helps in manufacture of goods and for a manufacturing concern majority of companies cash is invested in purchase and maintenance of plant and machinery. Plant and machinery are depreciated each year in order to reflect their true value
- Furniture and Fixtures – In any office of the company you will find tables, chairs, computers, office supplies, air conditioners etc…., these all are part of furniture and fixtures which company require in its office so that administrative operations of company are done smoothly and effectively. Furniture and fixtures are also depreciated each year.
- Vehicles – Under this category one can include all the office cars provided to employees, trucks and any other delivery vehicle which helps in moving goods from company’s manufacturing unit to customer residence or retail store.
- Building – Building is another important fixed asset, it includes all office premises, factory sheds, parking lot, flats or house for office employees and so on and hence any concrete structure which is in the name of firm will be classified as building.
Apart from above there are many assets which can be treated as fixed asset depending on the industry and company because one asset may be current asset for one company and fixed asset for the other and hence one should make that classification according to the industry in which company is operating and also on policy of each individual company for which this classification of assets is needed to be made.