The assets which are not converted in to cash within a normal course of time are called fixed assets. Normally the fixed assets are consumed in more than twelve months. Fixed assets are non-current assets or long-lived assets. Fixed assets are purchased for the purpose of production of the goods or for providing the services.
The value of these assets is shown in balance sheet at their current depreciated value. Depreciation is a cost of the use of the fixed assets. The cost of use of fixed assets is decided on the basis of the life of the fixed assets or output or operating measures such as kilometers for motor vehicles.
Fixed assets may be classified in to following categories:-
- Tangible Fixed Assets:- These assets are physically available. For example: building, furniture, machines, plant, vehicles, land etc. Tangible fixed assets again, can be divided in two parts; (i) the assets which have unlimited useful life like land and (ii) the assets having limited useful life like building, furniture vehicles etc.
- Intangible Fixed Assets:- Those assets which have not physical existence. For example:- goodwill, copy rights, patents, trade mark and leaseholds etc. Intangible fixed assets are also divided in two parts; (i) the assets which have a limited useful life like patent, copy right etc. and (ii) the assets which have unlimited useful life like goodwill, trade mark etc.
Fixed assets are shown in assets side of balance sheet at depreciated value.
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