Fixed assets are items that are expected to provide a benefit to the purchasing organization for more than one reporting period. When acquired, these items are recorded in a fixed asset account.
For accounting purposes, these items are segregated into multiple accounts, based on their characteristics. The following are examples of fixed asset accounts:
- Buildings. Includes all facilities owned by the entity.
- Computer equipment. Includes all types of computer equipment, such as servers, desktop computers, and laptops.
- Computer software. Usually only includes the most expensive types of software; all others are charged to expense as incurred.
- Construction in progress. This is an accumulation account in which are recorded the costs of construction. Once an asset (usually a building) is completed, the balance is moved to the relevant fixed asset account.
- Furniture and fixtures. Includes tables, chairs, filing cabinets, cubicle walls, and so forth.
- Intangible assets. Includes all nontangible assets, such as the costs of patents, radio licenses, and copyrights.
- Land. Includes the purchased cost of land, and may also include the cost of land improvements (which are otherwise recorded in a separate account).
- Leasehold improvements. Includes the costs incurred to renovate leased space.
- Machinery. Typically refers to production machinery.
- Office equipment. Includes copiers and similar administrative equipment, but not computers (for which there is a separate account).
- Vehicles. Can include company cars, trucks, and more specialized moving equipment, such as fork lifts.
These fixed asset accounts are usually aggregated into a single line item when reporting them in the balance sheet. This fixed assets line item is paired with an accumulated depreciation contra account to reveal the net amount of fixed assets on the books of the reporting entity.