What is Considered a Fixed Asset

A fixed asset is also called property, plant and equipment or PP & E. It is a term that is used in accounting to describe assets that cannot be easily converted into cash. The asset is usually a long-term, tangible asset that is used as part of the business.

A fixed asset can also be described as an asset that is not directly sold to the company’s consumers. You can look at it this way. If you have a company that is a donut shop, the firm’s current assets would be the flour, oil, etc. The company’s fixed assets would be the equipment used to make the donuts, cash registers, office equipment, etc. These items are not sold directly to the donut shop’s customers.

These are also items that the company plans to use for an extended period of time. Other fixed items that are associated with businesses are buildings, land, computers, office equipment, motor vehicles and machinery. They are offered a nice tax break called a depreciation allowance over short-term assets.

When using these allowances, it is important to note that the cost of a fixed asset is the purchase at which it was purchased. That would include even import duties and other trade discounts and rebates. In addition to the import duties, etc., you can also include the installation and de-installation or dismantling of the asset if it is no longer needed at that particular location. As you can see there are significant benefits to having fixed assets as part of almost any business.

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