What Are Fixed Assets? Key Characteristics and Examples

Any organization that uses tangible assets for its day-to-day activities can be said to have fixed assets. What are fixed assets? Examples include land, buildings, tools, and equipment. In accounting terms, fixed assets are usually itemized on the balance sheet as Property, Plant, and Equipment (PP&E). 

If it’s your job to determine what fixed assets are for your organization’s accounting purposes, you will want to get familiar with what makes fixed assets different from current assets.

How to Identify Fixed Assets

Use the following checklist in order to determine the difference between an asset and a fixed asset. 

1. They Are Useful For More Than One Accounting Period

Fixed assets will always be characterized by a useful life that lasts more than one accounting period, which is usually the same as one fiscal year. 

2. They Depreciate Over Time

Fixed assets are subject to wear and tear. That means that throughout their lifespan, they will eventually be worth less than what the organization paid to purchase them. It’s important to track an asset’s rate of depreciation throughout its useful life. 

3. They Are Not Liquid

Because fixed assets are long-term investments intended to support business operations on an ongoing basis, they are not easily resold or liquidated. Current assets, however, are assets that businesses expect to use or sell within a year of acquisition. These assets can include cash, accounts receivable, day-to-day supplies, or inventory that’s ready to be sold. 

4. They Provide Long-Term Revenue benefits

Fixed assets are critical to an organization’s day-to-day operations, to the point that it would be very difficult for a company to deliver revenue without them. Whether the assets make employees’ jobs easier, help the business to better serve its customers, or both, they count as fixed. 

Examples of Fixed Assets

While fixed assets are often tangible items, there are some cases where assets can be considered both fixed and intangible (more on this below). These are examples of fixed assets and the typical ways that organizations utilize them.

• Vehicles. A shipping company will include its vehicular fleet among its fixed assets. However, a car for personal use doesn’t count as a fixed asset.
• Buildings. An organization that stores inventory would include warehouses among its fixed assets. (But not the inventory kept inside them. Those are liquid, and therefore current assets.)
• Land. If the same company buys land to build warehouses on it, the land also counts as a fixed asset. Keep in mind that land is a fixed asset that isn’t subject to depreciation as it isn’t expected to lose value over time. 
• Machinery. A company that creates a product on the premises with certain tools or machines would count their essential equipment as fixed assets.
• Furniture. Office buildings, schools, and most other organizations rely on furniture like desks and chairs for their employees, which are common fixed assets.
• Software. While it may not be tangible, computer software still counts as a fixed asset for organizations that rely on it for their day-to-day revenue-building activities. 

For accounting purposes, all of these example assets can be itemized on the company balance sheet under Property, Plant, and Equipment (PP&E).

Why Tracking Fixed Assets is Important

Once your organization’s fixed assets have been identified, it is vital to carefully keep track of them–and their depreciated value–for accounting purposes. 

Effective fixed asset tracking offers a few benefits to your company:

• Cost savings: If you’re unable to locate the fixed assets you need, you’ll likely replace them without a second thought. But with proper asset tracking, you can gain clear visibility into the status, location, and availability of your assets to optimize fixed asset utilization.
• Better decision-making: With effective depreciation tracking, you know when a piece of equipment is getting old and may need to be replaced. Tracking assets means you can predict likely future expenses before they happen and allocate budget accordingly.
• Increased accountability: By tracking the full lifecycle of your fixed assets, including who they’re assigned to and where they’re located, you can enhance accountability throughout your organization if an item becomes damaged or goes missing.

Beyond the above advantages to fixed asset tracking, perhaps the most important benefit is keeping clear audit trails for regulatory and financial compliance purposes. Whether you’re aiming to comply with a new standard or have had inaccuracies on your balance sheet, your organization may be subject to an external audit. All the better reason to clearly track and audit fixed assets internally before an external review.

How to Keep Track of Fixed Assets

Just looking around your organization’s headquarters, you may be able to count hundreds of assets including desks, chairs, IT devices, or tools. With such a large range of fixed assets, it would be a challenge to keep track of all of that on one overworked Excel spreadsheet.

Classifying your organization’s various assets is vital to ensuring an accurate balance sheet. Once you’ve identified your fixed assets, you can take the guesswork out of managing them with a dedicated asset tracking platform. Asset Panda’s powerful solution allows companies of all industries and sizes to track their fixed assets in real time and manage their full lifecycle history for effortless accounting.

From vehicles to software to furniture, Asset Panda can be customized to manage all your unique assets and workflows in one centralized solution. Add unlimited users to your platform to quickly assign assets to employees and enhance accountability. Plus, manage your assets from anywhere with our companion mobile app and create custom barcode labels for your physical assets using our built-in barcode technology.

If you’re looking for a robust solution to manage all your fixed assets, look no further. Discover how Asset Panda can meet your unique needs and request your personalized demo today.