What are Fixed Assets

In accounting terms there are generally two types of assets; Fixed Assets and Current Assets. The only difference between them is that current assets have a short life span, less than a year; while fixed assets have a longer life span; normally two years and longer. These two types of assets are also treated separately on the balance sheet. That's it, very simple. Not so?

For example, the business's Petty Cash Book (account) is a current asset. Why? Because the value changes daily, it is not stagnant or fixed. And it is very small in comparison to fixed assets such as buildings, land, machinery, etc. Compare it also to a fixed investment, which is usually long term in nature.

Toilet paper, stationery, stock, raw materials, cleaning materials, staff refreshments, and the like, are not going to exist for very long. No longer that about one month before you have used them up, and they need to replaced. However, land & buildings, vehicles, furniture, machinery, computers and office equipment you will have for at least three years before replacing them; if not much longer. The latter are Fixed Assets.

Another type of fixed asset of note is an intangible asset; an item or asset that you cannot touch or see. Above we spoke only of tangible assets, things that do physically exist.