A fixed asset is a long-term, tangible asset owned by a company and used to support its operations to generate value. These assets are not intended for resale and are typically used for more than one year. Fixed assets gradually lose value over time due to usage, wear and tear, or obsolescence. This reduction in value is recorded through "depreciation" for tangible assets or "amortization" for certain intangible assets.
Common examples of fixed assets include:
These assets are usually significant investments.
In business and accounting, assets can generally be categorized into current assets and non-current assets. Current assets are short-term resources that are usually convertible to cash within one year. Liquid assets such as cash, accounts receivable, and financial securities are current assets. Inventory, which includes raw materials, work-in-progress, and finished goods are also included in a company's current assets.
On the contrary, non-current assets are long-term investments that are typically held for over a year and used for long-term growth. Fixed assets are categorized as non-current assets, and these types of assets are not easily converted into cash.
In ERP and data management systems, fixed assets are typically managed through dedicated modules or databases. For example, Ragic provides built-in finance and accounting modules and an equipment tracking template, that makes it easier for businesses to track fixed assets.
Systems help organizations record asset acquisition details such as vendor and cost information, track depreciation over time, monitor asset location and usage, manage maintenance schedules, handle asset disposal or sale, and calculate book values for financial reporting.
By centralizing this information, businesses can maintain accurate financial records and ensure compliance with accounting standards.
