Small Business Accounting

What are Fixed Assets?

By

Chris Andreou

What are Fixed Assets? guide

Contents

Fixed assets are property or equipment that a company owns, and uses in its day-to-day operations for income generating activities. These include machinery, equipment, buildings and land.

What Are Fixed Assets?

Fixed assets are tangible items that a business owns and uses in its operations. These assets are usually long-term investments and are considered to be the backbone of any business. They are also referred to as capital assets, plant assets, or property, plant and equipment (PP&E).

Fixed assets are important for businesses because they provide the necessary resources to produce goods and services. They can also be used as collateral for loans and investments, and they can help generate income.

Fixed assets can include items such as land, buildings, machinery, vehicles, furniture, and computer equipment. They can also include intangible items such as patents, copyrights, and trademarks.

In the UK, fixed assets are typically defined as those that are held for more than one year. This is because the tax system in the UK is based on the accrual basis of accounting, which means that expenses and income are recorded when they occur, rather than when they are paid or received.

When setting up a business, it is important to consider the types of fixed assets that will be required. For example, if you are starting a manufacturing business, you will need to purchase machinery, tools, and other equipment. If you are setting up an office, you will need to purchase furniture, computers, and other office supplies.

It is also important to consider the cost of the fixed assets. This will depend on the type of asset and the quality of the item. For example, the cost of a new computer will be higher than the cost of a used one.

When purchasing fixed assets, it is important to consider the depreciation of the asset. This is the amount of the cost that is written off each year due to the asset’s age and wear and tear. The depreciation rate of an asset can be determined by the type of asset and its useful life.

It is also important to consider the maintenance of fixed assets. This is the cost of repairs and maintenance that are required to keep the asset in good condition.

Finally, it is important to consider the insurance of fixed assets. This is the cost of insurance that is required to protect the asset from damage or theft.

Fixed assets are an important part of any business, and it is important to consider all of the costs associated with them. By understanding the types of fixed assets that are required, the costs associated with them, and the maintenance and insurance costs, you can ensure that your business has the necessary resources to succeed.

<p>Fixed assets are property or equipment that a company owns, and uses in its day-to-day operations for income generating activities. These include machinery, equipment, buildings and land.</p>

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