What Are Common Examples of Fixed Assets?

Assets are economic resources controlled by a business, expected to provide future benefits. Fixed assets hold a distinct position among these, contributing to a company’s operations and financial strength by generating long-term value.

Understanding Fixed Assets

Fixed assets are tangible, long-lived resources a company uses in its operations to produce goods or services, not for immediate sale. They typically have a useful life extending beyond one accounting period. Considered noncurrent assets, they are not expected to be converted into cash within 12 months. This differentiates them from current assets like cash or inventory, which are more liquid and intended for short-term use. Fixed assets represent a significant investment fundamental to a business’s ongoing activities.

Common Categories and Specific Examples

Fixed assets include various physical items businesses acquire to support revenue-generating activities. They are often referred to collectively as property, plant, and equipment (PP&E) on a company’s balance sheet.

Land

Land is a unique fixed asset because it is not subject to depreciation; its value generally appreciates or remains constant. This category includes the ground for a company’s operations, such as a factory, office building, or retail store. Land acquired for future expansion or investment also falls under this classification.

Buildings

Buildings are structures used for business operations, including offices, factories, and retail outlets. Their cost includes the purchase price and any expenditures to make them ready for use, such as architectural or construction costs. Significant improvements extending a building’s useful life or enhancing its value are also added to its cost.

Machinery and Equipment

Machinery and Equipment include items directly involved in producing goods or delivering services. Examples range from heavy manufacturing equipment like assembly lines and industrial robots to office equipment such as large copiers and servers. Tools used in operations, like those in a construction company, are also classified here.

Vehicles

Vehicles used for business purposes are fixed assets. This category includes company cars, delivery trucks, vans, and heavy construction vehicles like excavators. Their use in generating business income is the key determinant, not personal use.

Furniture and Fixtures

Furniture and Fixtures comprise items that furnish an office, retail space, or other business premises. Furniture includes movable items like desks, chairs, conference tables, and filing cabinets. Fixtures are items generally attached to the building, such as built-in cabinetry, lighting fixtures, or display cases, which are not easily removed without damage.

Leasehold Improvements

Leasehold Improvements are modifications made by a tenant to a leased property. Examples include installing interior walls, new flooring, or custom plumbing systems. These improvements are capitalized by the tenant because they provide long-term benefits to their operations, even though the property is leased.

Accounting Treatment of Fixed Assets

Fixed assets are recorded on a company’s balance sheet, often labeled Property, Plant, and Equipment (PP&E). When acquired, their cost is capitalized rather than immediately expensed. Capitalization means the purchase price, plus any costs to get the asset ready for use, are recorded as an asset.

Most fixed assets are then subject to depreciation, a systematic allocation of the asset’s cost over its estimated useful life. Depreciation reflects the wear and tear or consumption of the asset’s economic benefits over time. This process matches a portion of the asset’s cost with the revenues it helps generate each period.