What Are Fixed Assets on a Balance Sheet? Understanding the Basics

Effective fixed asset management isn’t just about gaining visibility into your inventory–it’s vital to your organization’s financial health and compliance. From office buildings to machinery to IT equipment, your fixed assets are long-term investments that directly impact your business operations. This means tracking the value of your fixed assets on a balance sheet is essential for painting an accurate picture of your company’s finances. So, what are fixed assets on a balance sheet and how should you record them?

Defining Your Fixed Asset Inventory

Before you can properly track fixed assets on your balance sheet, you first need to take stock of your organization’s inventory. Fixed assets are typically known as long-term tangible assets that aid your business in generating revenue. Here are several key characteristics of fixed assets to consider as you review your asset inventory:

1. They have a useful life of more than one fiscal year: Fixed assets are purchased for long-term support of your business operations and are meant to last for more than one accounting period, or one fiscal year.
2. They are subject to depreciation: Due to their long lifespan, fixed assets will gradually decline in value over time as they go through wear and tear.
3. They provide long-term revenue benefits: From office space to employee laptops, fixed assets are designed to support your revenue generation on a long-term basis.
4. They are not liquid: Fixed assets are not liquid, meaning they are not easily sold off or converted to cash.

Your business likely uses some combination of fixed assets to conduct its daily operations–these can include:

• Real estate, such as office buildings or warehouses
• IT assets, from servers to employee laptops
• Tools and heavy machinery
• Vehicles
• Furniture
• Land

While the vast majority of fixed assets are subject to depreciation, it’s important to note a couple of exceptions. Land and real estate typically increase in value over time and should be excluded from accumulated depreciation calculations (more on this in a bit).

Read More: Which Assets Cannot Be Depreciated?

Key Fixed Asset Details to Track

Establishing a robust database of your fixed asset inventory is essential for long-term asset maintenance and accurate financial statements. Whether you’re optimizing an existing asset management system or starting from scratch, there are various fields you should include in your asset records for effective tracking.

• Unique asset ID or serial number
• Status (e.g., available, assigned, out for repair)
• Location
• Assignee (if the item is checked out to one particular person, such as a laptop)
• Original purchase price
• Accumulated depreciation

While these fields will likely be relevant across all your fixed asset categories (like IT devices, vehicles, or machinery), you may need to track other details specific to each asset group. For example, with computers, you’ll want to track details like model number, operating system, and MAC address. With vehicles, you’ll need to include information like make, model, VIN, and mileage. Tracking these fields and their change history allows your organization to effectively manage the full lifecycle of your assets so you can avoid unexpected purchases and potential downtime.

The Importance of Including Fixed Assets on Your Balance Sheet

There’s no denying the importance of keeping detailed records in your fixed asset management system, but why are fixed assets on a balance sheet? Fixed asset tracking is not only vital to your operational efficiency but also for accounting purposes. A balance sheet provides an overview of your finances at a specific point in time, and reporting on the current value of your fixed asset inventory helps your organization accurately portray your financial health to key leadership, investors, and other stakeholders. Plus, as the value of your fixed asset inventory decreases over time due to depreciation, your business will receive more tax benefits.

How to Document Fixed Assets on a Balance Sheet

When recording your fixed assets on a balance sheet, they typically fall under a line item known as Property, Plant, and Equipment (PP&E). However, it’s important to note that it is not the upfront value of your fixed assets recorded under PP&E but, rather, the initial purchase price minus their accumulated depreciation. Accumulated depreciation is an asset’s total depreciation over its lifespan, not just in the last fiscal year.

For example, if a company laptop’s straight-line depreciation rate is $1,500 per year, a three-year-old laptop would have an accumulated depreciation of $4,500. If the original purchase price of the computer is $11,000, the value on your balance sheet would be $11,000-4,500 = $6,500.

Once you determine the current value of your fixed assets, the next question is, where are fixed assets on a balance sheet? First, it’s important to understand that balance sheets follow one particular equation:

Assets = Liabilities + Shareholder Equity

Your Assets are listed at the top of a balance sheet, then Liabilities, then Shareholder Equity as you move down the sheet. You’ll account for the current value of your PP&E within the Assets section as its own line item.

Learn More: Tracking Depreciation On A Balance Sheet

Streamline Your Fixed Asset Tracking with Asset Panda

Proper asset management not only helps you keep track of fixed assets on a balance sheet but also supports your daily operations and long-term revenue generation. While different teams may manage routine asset management workflows vs depreciation tracking, a centralized solution can help everyone from Asset Managers to Accountants save valuable time.

Asset Panda’s cloud-based asset platform enables you to track the full lifecycles of all your fixed assets in one convenient place. Create custom fields for each unique asset category and automate depreciation calculations using your chosen method. 

With visibility into an asset’s current status, maintenance history, and accumulated depreciation, everyone can access the information they need to perform workflows and audits or fill in balance sheets. Plus, Asset Panda allows you to add unlimited users to your platform and assign custom roles to ensure data integrity and accountability.

Ready to streamline your fixed asset tracking and financial reporting? Schedule your personalized demo today to see how Asset Panda can help your organization work smarter.