Fixed Asset

Finance

Quick Definition

A Fixed Asset is a long-term tangible asset used in business operations that is not intended for resale, such as buildings, machinery, or equipment.

Detailed Explanation

Fixed Assets are essential for running a business and are used over a long period (usually more than one year). These assets are recorded on the balance sheet and their value reduces over time through depreciation.

They are also known as non-current assets because they are not easily converted into cash.

Examples of Fixed Assets

  • Land and buildings
  • Machinery and equipment
  • Vehicles
  • Furniture and fixtures

Key Features

  • Long-term usage
  • Not meant for resale
  • Subject to depreciation (except land)
  • Helps generate revenue

Fixed Asset vs Current Asset

  • Fixed Asset: Long-term (e.g., machinery)
  • Current Asset: Short-term (e.g., cash, inventory)

Why Fixed Assets Matter

  • Essential for business operations
  • Indicates company’s investment in infrastructure
  • Important for financial analysis

Example

"A company purchases machinery worth ₹10 lakh for production—this is a fixed asset and will be depreciated over time."

← Back to Financial Dictionary