Fixed assets, also known as property, plant and equipment (PP&E), are tangible assets that a company expects to use for more than one accounting period. They are part of the non-current assets of an entity, and are different from cash and other current assets that will be used up within the accounting period.

To learn more about asset classes, check out "What is the difference between tangible and intangible assets?"

Understanding Assets

Essentially, assets are things that a company owns or controls in order to benefit from their use in some way. Assets can be things that either support the primary operations of a company, such as buildings, or that generate revenue for the company, such as machines or inventory.

Examples of fixed assets include buildings, land, furniture and fixtures, vehicles and personal computers. Fixed assets are described as tangible because they generally have some form of physical substance, unlike intangible assets such as goodwill, copyrights and trademarks. In a financial statement, non-current assets, including fixed assets, are those with benefits that are expected to last more than one year from the reporting date.

Current assets such as cash, inventory, accounts receivable and short-term investments are assets that the company plans to use up or convert into cash within one year from the reporting date. Inventory is classified as a current asset because cash is expected to be generated when the company sells the inventory. Likewise, accounts receivable should bring an inflow of cash.

A personal computer is a fixed and non-current asset if it is to be used for more than a year to help produce consumer goods that the company will sell. A vehicle is also a fixed and non-current asset if its purposes will include commuting or transportation of company products, for instance. PP&E is generally reported in financial statements as net of accumulated depreciation.

Aside from fixed assets, other types of non-current assets include intangible assets and long-term investments. Investments in bonds are classified as short-term investments and current assets, if they are expected to earn a higher rate of return than cash and if they have less than one year to maturity. Bonds with longer terms are classified as long-term investments and as non-current assets.

  1. How are current and noncurrent assets different?

    Current assets are assets that can be converted to cash in less than a year, while noncurrent assets are long-term assets. ... Read Answer >>
  2. How do you account for changes in the market value of various fixed assets?

    Understand how to account for changes in the fair market value of a company's fixed assets. Learn what accounting methods ... Read Answer >>
  3. Why is work in progress (WIP) considered a current asset in accounting?

    Find out why accountants consider work in progress (WIP) to be a current asset on the balance sheet for financial accounting ... Read Answer >>
  4. How are net tangible assets calculated?

    Learn about net tangible assets, what it measures and how to calculate a company net tangible assets using examples. Read Answer >>
  5. How do intangible assets show on a balance sheet?

    Intangible assets are often intellectual assets, but their valuation and accounting can vary, depending on whether they're ... Read Answer >>
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