Fixed assets – What are fixed assets?
The term fixed assets refers to assets that cannot be converted into cash easily - most notably a company's property, plant and equipment. These assets are usually listed on a company's balance sheet below current assets.
Fixed assets also include any assets a company has that are not sold directly to their customers - e.g. motor vehicles, furniture, office equipment, computers, etc.
Depreciation of fixed assets
Fixed assets are included in the balance sheet at their initial cost, and then depreciated throughout their useful life until they are sold, replaced or recorded on the balance sheet at their residual value.
The depreciation of a fixed asset is the initial cost less the residual value. It is recorded as an expense since it diminished the value of a company's total holdings.