What is a fixed asset?
A fixed asset is one of two major categories of physical property for a company and includes those items that remain in one location during business operation. Fixed assets do not include movable assets or inventory items that are consumed in a production process.
Typical fixed assets include buildings, furniture, large pieces of equipment, and systems such as lighting and heating, ventilating, and air conditioning (HVAC). Fixed assets are usually one-time investments and have longer life spans.
The term fixed asset refers to tangible property, equipment, or material owned by a company for long-term periods. Fixed assets are not easily or readily convertible to cash, as they are not intended to. Instead, fixed assets are thought to be significant pieces of property that are essential to sustain operations.
Fixed assets are also referred to as capital assets or sometimes collectively known as property, plant, and equipment (PP&E). These terms are used interchangeably to refer to physical assets that are pretty much permanent fixtures within the plant.