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What is Fixed Assets Management?

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Regardless of the size of your business, it’s likely that you own both fixed and current assets. Current assets, such as cash, are those assets that are used up or replaced quite frequently within the life of your business. In contrast, fixed assets are business possessions that have a much longer expected life cycle within the business (usually over a year), and which help the business to produce extended profits. Common examples of fixed assets include vehicles, computer equipment, land, buildings and plant machinery. An additional subdivision of fixed assets also exists in which fixed assets are broken into tangible fixed assets – such as those listed above – and intangible assets, such as copyrights/what-are-patents.php">patents.

Fixed assets management is an accounting term that covers a wide range of issues concerning the purchase, monitoring, tax reporting and disposal of fixed assets within a business. Fixed assets are often relatively expensive and, in the case of many manufacturing companies, comprise a significant investment for the business. Consequently, it’s important that businesses have a fixed asset management structure in place that allows them to identify, categorize and properly assess their fixed assets. Perhaps the best known function of fixed assets management is its ability to allow companies to accurately calculate their earnings for each financial period. Unlike current assets, fixed assets may benefit a business for several years, a period known as the useful life of the fixed asset. As the fixed asset is used (or simply ages), however, the ability of the fixed asset to benefit the business is often reduced. That reduction is viewed as an expense which the business must pinpoint in order to accurately determine profits. Depreciation is the accounting term for the process of calculating the slow consumption of the useful life of a fixed asset.

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