Fixed Assets
Fixed assets are assets that a company holds for a long-term and uses for production and business activities. Fixed assets include land, buildings, machinery and equipment, vehicles, etc. Fixed assets usually have a longer useful life and cannot be easily sold or converted into cash. Companies purchase fixed assets to support their production and business activities, and the value of fixed assets gradually decreases over their usage.
Fixed Assets
Definition
Fixed assets are long-term assets held by a company for use in its production and business activities. Fixed assets include land, buildings, machinery, vehicles, etc. These assets typically have a long useful life and cannot be easily sold or converted into cash. Companies purchase fixed assets to support their production and business activities, and the value of these assets gradually decreases over time.
Origin
The concept of fixed assets can be traced back to early commercial activities when merchants and businesses needed long-term tools and equipment to support their production and trading activities. With the advent of the Industrial Revolution, the types and importance of fixed assets increased significantly, and companies began to systematically record and manage these assets.
Categories and Characteristics
Fixed assets can be divided into the following categories:
- Land and Buildings: Includes land, factories, office buildings owned by the company. These assets typically have a long useful life and high value.
- Machinery and Equipment: Includes production equipment, office equipment, etc. These assets are directly used in production and business activities and have a relatively shorter useful life.
- Transportation Tools: Includes vehicles, ships used for transportation by the company. These assets are used for logistics and transportation and have a medium useful life.
- Other Fixed Assets: Includes furniture, computers, and other long-term use assets.
Specific Cases
Case 1: A manufacturing company purchases a production machine worth 1 million yuan for expanding its production line. The machine has an estimated useful life of 10 years, with an annual depreciation of 100,000 yuan. With this machine, the company's production efficiency increased by 20%.
Case 2: A logistics company purchases 10 new trucks worth a total of 5 million yuan. These trucks are used to expand the company's transportation capacity, with an estimated useful life of 5 years and an annual depreciation of 1 million yuan. With these new trucks, the company can take on more transportation orders, increasing its revenue by 15%.
Common Questions
Question 1: How is the depreciation of fixed assets calculated?
Answer: The depreciation of fixed assets is usually calculated using the straight-line method, which involves subtracting the residual value from the initial value of the asset and then dividing by the useful life to get the annual depreciation amount.
Question 2: Can fixed assets be sold at any time?
Answer: Fixed assets cannot usually be easily sold because they are essential for the company's production and business activities, and selling them would affect the company's normal operations.
