Definition of Fixed Assets

In the financial context of a company, fixed assets are those assets that the company uses continuously during the normal course of operations and that will represent the set of services that will be received in the future throughout the useful life of a good acquired.

Meanwhile, for an asset to be plausible to be considered as the fixed asset of a company, it must meet or meet the following characteristics: be physically tangible, have a relatively long useful life, at least greater than one year, their benefits must be extended for at least one year or a normal cycle of operations, be used in the production or commercialization of goods and services, either to be rented to third parties or for administrative purposes, this means that the good exists with the purpose to be used in the operations of the company on an ongoing basis and not to be used for sale in what would be the normal course of business.

To further clarify the issue, it is better to give an example that better illustrates the concept, a truck will be the fixed asset of a company, as long as it is used only for the

transport and delivery of merchandise that it sells, but, in a company that sells transportation, that same truck will be part of its Inventory and it will be destined for sale so it would not correspond in this case, for the purpose it has, to a fixed asset of the company.

Although, as mentioned above, fixed assets have a considerable duration in time, they are not eternal either, so it is for this matter that the accounting force to depreciate the goods as time passes, because inevitably the use, the wear and tear that comes from the activity they hold and also the fashion, which sometimes makes things old, will contribute to the loss of value of a good.

Therefore, what the accounting work in question indicates is to carry out a amortization of long-term expenses, for which there are tables and special depreciation and amortization methods that are dedicated to this. Through these alternatives, the value of the asset is reduced and it will be reflected as an expense and the prepaid expense will be applied in the corresponding period.

Fixed Assets Topics