capitalization journal entry example：Fixed Asset Accounting Explained w Examples

Fixed assets[1] are one of the main pillars of business. Many organizations would not exist or generate revenue without their property, plant, and equipment. To understand accounting and financial reporting, begin with a broad-level knowledge of fixed assets.

What are fixed assets?

In accounting, a fixed asset, also known as a capital asset[2] or tangible asset, is a tangible long-lived piece of property or equipment a company plans to use over time to help generate income. ASC 360, Property, Plant, and Equipment is the US GAAP accounting standard regarding fixed assets (ASC 360).

Fixed asset examples

Fixed assets are purchased for long-term business use. These items are also referred to as property, plant, and equipment, or PP&E. Examples include:

Current assets vs. long term assets

Current assets refer to company-owned items that will be converted into cash within the year. This includes items such as inventory and accounts receivable. Long-term assets are...