The difference between assets and fixed assets
/What are Assets?
An asset is an expenditure that has utility through multiple future accounting periods. If an expenditure does not have such utility, it is instead considered an expense. Examples of assets are cash, trade receivables, inventory, and prepaid expenses. Assets appear on a reporting entity’s balance sheet.
What are Fixed Assets?
A fixed asset is property with a useful life greater than one reporting period, and which exceeds an entity's minimum capitalization limit. A fixed asset is not purchased with the intent of immediate resale, but rather for productive use within the entity. Also, it is not expected to be fully consumed within one year of its purchase. Examples of fixed assets are buildings, computer hardware and software, furniture and fixtures, land, manufacturing equipment, office equipment, and vehicles. Fixed assets appear in the long-term assets section of a reporting entity’s balance sheet.
Comparing Assets and Fixed Assets
The key differences between assets and fixed assets are as follows:
Asset size. Fixed assets are generally larger in amount than other assets, and are utilized over an extended period of time.
Use of depreciation. Fixed assets are depreciated ratably over their useful lives, which is not the case for other assets.
Relationship between the concepts. Fixed assets are a subset of all assets.
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Assets and Fixed Assets FAQs
What other types of assets exist besides fixed assets?
Besides fixed assets, a business may have current assets, intangible assets, financial assets, deferred tax assets, and other long-term assets. Current assets include cash and receivables. Intangible assets include patents and trademarks. Financial assets include investments. Other long-term assets may include security deposits, deferred charges, and capitalized contract costs.
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