What Is a Fixed Asset?
A fixed asset is a long-term tangible asset a business buys for ongoing use rather than resale — such as land, buildings, machinery, vehicles, and equipment. Fixed assets provide value over multiple years and are depreciated over their useful lives.
What a fixed asset is and why it matters
Fixed assets (also called property, plant, and equipment, or PP&E) are the productive backbone of many businesses. Unlike current assets, they aren't expected to convert to cash within a year; they're held to generate revenue over the long term. Because their cost is spread across their useful life through depreciation, they appear on the balance sheet at book value — original cost minus accumulated depreciation. Tracking fixed assets accurately matters for depreciation, for insurance and tax, and for understanding how capital-intensive a business is.
A worked example
A manufacturer buys a CNC machine for $120,000, expected to last 8 years. It's recorded as a fixed asset at $120,000, not expensed immediately. Using straight-line depreciation, $15,000 is expensed each year. After three years, accumulated depreciation is $45,000 and the machine's book value on the balance sheet is $120,000 − $45,000 = $75,000, even though the full $120,000 cash outflow happened at purchase.
How firms handle it today
Firms maintain a fixed-asset register and depreciation schedule per asset, posting depreciation at close and reconciling the register to the general ledger.
Related terms
- Asset
- Depreciation
- Book value
- Current asset
- Historical cost
FAQ
What's the difference between a fixed asset and a current asset?
Fixed assets are long-term resources used to operate the business; current assets convert to cash within a year.
Are fixed assets depreciated?
Yes — most fixed assets (except land) are depreciated over their useful lives to spread the cost across the periods they benefit.
What are examples of fixed assets?
Land, buildings, machinery, vehicles, furniture, and equipment.