Fixed Assets

Fixed Assets are properties or goods owned by an organization for a period of more than one financial year. They have a unique feature of losing their economic value on usage through process of depreciation known as wear and tear. For example, fixtures and fitting, motor vehicle, machinery, office equipment, loose tools and plants (heavy earth moving machinery). Other properties categorized as fixed assets are land and buildings although they don’t undergo wear and tear. But for the sake of easy understanding of balance sheet components, these two assets are termed as part of fixed assets. It should be noted that fixed assets are also referred to as non-current assets.

When are Fixed Assets required?

Fixed Assets are required when an investment opportunity arises and there is need of generating income.

Why is Fixed Assets necessary?

Fixed Assets are necessary for they balance the financing needs. In other words, the fixed assets represent the financing done by the management and they are necessary for they aid in generating income to cove average costs.

About the Author - Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers.