What are Fixed Assets? Characteristics, Types, and Benefits

Fixed Assets are – Talking about business, maybe what Sinaumed’s has in mind is just the production process, finished products, sold and then made a profit. Yes indeed it is in the business flow process. But actually there are other things that are enough to support the development of a business, you know .

One of them is fixed assets , for ordinary people this term is rarely heard. But for business people it is often heard.

If Sinaumed’s is going to run a business, understanding what fixed assets are is very important. Moreover, the existence of these fixed assets can provide support for the development of a business.

You don’t need to be confused if Sinaumed’s doesn’t know what a fixed asset is and some other things related to this term. Because this article will provide an explanation about this. So, below are some important explanations about fixed assets .

What are Assets

Before going into the explanation of fixed assets , we can start from the explanation of the assets themselves. Simply put, company assets are an economic resource that is expected to be able to generate profits in the future.

An asset can be recognized if all economic resources can be measured in currency. Whether it’s dollars, rupiah and other types of currency. It is undeniable that the existence of assets is very important in a company.

In fact, the existence of this asset support is expected to make business processes even smoother. Besides in the form of objects such as land, money, buildings, tools and equipment. It turns out that assets also include human resources such as employees and service users or product buyers offered by a company.

What are Fixed Assets

After knowing the meaning of assets , we continue to discuss fixed assets. In simple terms, a fixed asset is a property or asset in the form of property or equipment with a long-term nature .

The existence of fixed assets is expected to be able to provide business process support in order to get certain benefits. Fixed assets are also often referred to as fixed assets. At least for fixed assets can not provide an advantage in the form of money in the range of under or about one year.

If you look at the balance sheet, the existence of fixed assets can be in the form of property , factories or equipment. Apart from being referred to as fixed assets, several forms of fixed assets are also often referred to as capital assets .

Characteristics of Fixed Assets

Some of you are confused about how to distinguish fixed assets and non-fixed assets. Actually, in terms of characteristics alone, it can be seen what a fixed asset is . But maybe because of the lack of information related to the characteristics of fixed assets , some people don’t know about it.

No need to be confused about this, at this point we will provide a more complete explanation regarding the characteristics of fixed assets . So, no need to linger, below is a review of some of the characteristics possessed by fixed assets .

1. The useful life from an economic perspective is more than one year

The first characteristic of fixed assets is that the age of these assets has a long reach, at least more than one year. Then, in the fixed asset balance sheet, most of them are in the form of property, equipment in the factory or the factory building itself.

2. There is a Depreciation Value

The second characteristic is the depreciation value of various forms of fixed assets . This can happen because these fixed assets are used continuously from time to time.

In addition, due to continuous use of fixed assets, it can also result in a decrease in quality. No wonder the value of fixed assets also decreased. However, it should also be noted that the depreciation condition does not apply to land type fixed assets  .

3. Providing Benefits for the Company

The next characteristic of fixed assets is being able to provide benefits for the company. For example, a company has a production plant. Production carried out by the factory uses operational equipment or one form of fixed asset .

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Later the results of the production carried out will be sold. The profit from the sale is one of the characteristics of fixed assets .

4. Not in Liquid Form

The last characteristic of fixed assets is that they are not in liquid form. This means that fixed assets cannot be converted into money or into cash.

Those are some of the characteristics possessed by fixed assets . Of course, the discussion about fixed assets does not end there . There is still a lot of material that we can learn together as below.

Fixed Asset Types

The next explanation is on the type of fixed asset . Actually this type of asset will be explained based on an example. However, so that you understand better too, there will be an additional explanation of the types of fixed assets based on their shape. The following is an explanation of the types of fixed assets based on examples.

Tangible Fixed Assets

As the name implies, a tangible fixed asset is an asset that has a physical form. Tangible fixed assets are still divided into three. You can read about these three types in the explanation below.

  1. Assets with depreciable value. Examples are buildings, machines, vehicles, laptops and others.
  2. Assets with a value that can experience depletion conditions. This depletion condition is in the form of natural resources that will run out due to continuous exploitation by companies. Examples are the natural resources of oil, coal, gold and so on.
  3. Assets that are not experiencing conditions of deflation or depreciation. Soil is one example.
  • Land

Land is the first example of a fixed asset . If a company has a fixed asset in the form of land, then the company can make a long-term investment. Of course the company will benefit from the type of land investment it does. Even from these benefits can also be a support for the sustainability of the company itself.

  • Building

Next there is a building or building which is also an example of a fixed asset . Recording of buildings that stand on land must also be separated from the land used for the construction of a building.

  • Machine

Furthermore, there are machines that are also included in the fixed asset type . Where the existence of this machine is also a supporter of the continuity of the production process of an item that aims to provide benefits for the company.

As for examples of the machine itself, such as computers, printers , fax machines and telephones. In addition, several other office equipment such as tables, chairs, cabinets and others in the company or factory are also included as a type of fixed asset .

  • Conveyor Tool

Transport equipment is also included in the category of fixed assets . Where later this transportation tool is used to deliver goods produced to consumers, clients and other parties who work with the company.

Then, for example, there are trucks, vans and other types of vehicles that can be used to deliver these products.

  • Infrastructure

Lastly, there is infrastructure which is also included in the fixed asset type . For example, roads, bridges and fences.

Intangible Fixed Assets

Just as the name implies, an intangible fixed asset is an asset that has no physical form but provides benefits for the company. Examples are copyrights, patents, franchise rights, trademarks, logos and so on.

Based on the explanation above, the types of fixed assets can also be seen based on their shape. At least there are tangible fixed assets and intangible fixed assets . Both have different meanings.

 

How Important are Fixed Assets for Companies?

Maybe in your mind you have a question about how important fixed assets really are for a company, or whether a company really and should have fixed assets . The answer is that fixed assets are very important for a company.

The sustainability of the company will continue to run and develop when it has fixed assets . Like the several types and examples of fixed assets described above. All examples always refer to the production to distribution processes that provide benefits to the company.

Just imagine if a company does not have fixed assets . Of course it can’t work as it should. In addition, for investors the existence of fixed assets in a company is also a special consideration when investing in that company.

It should also be noted , investors will be more interested in investing in companies that are able to use fixed assets more efficiently. This is because the more efficient fixed assets are , the greater the profit will be.

 

Benefit Information About Fixed Assets

The existence of fixed assets is also very important , you know the reporting for the sustainability of the company. This is because a company will find it easier to get investors if fixed assets can be put to good use.

Investors will make fixed asset reporting a determinant of whether they will continue to provide investment funds or buy shares in the company. In addition, fixed assets can also help the process of recording finances more accurately, assessing the running of the company’s business so that the overall financial process will also be easier.

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How Companies Get Fixed Assets

It turns out that a company can have fixed assets in various ways . Maybe even some of you who do not know some of these ways. Don’t worry, at this point there will be a full explanation of several ways a company can get fixed assets . The following is an explanation of this.

  • Cash Purchase

Fixed assets in a company can be obtained by purchasing cash. Meanwhile, the fixed asset purchase price recording will be the same as the set price. For example, a plot of land has a price of IDR 100 million, so the record is made with the same figure, namely IDR 100 million. The point is that the price recording of fixed assets obtained from cash purchases will be recorded absolutely as is, there is no change in the number.

  • Purchase With Installment System

Fixed assets can also be obtained by installments. The fixed asset payment process will be carried out for a predetermined period of time. However, only the price section is recorded, while the interest that is applied will still be recorded, but separately from the price section.

  • Exchange With Securities

Fixed assets can be consolidated with a securities exchange system. Meanwhile, for recording the price of the fixed assets obtained will be equated with the price of the letters exchanged.

However, if the price of the securities to be exchanged is not known, then the recorded price will be set at the market value of the fixed asset.

  • Exchange With Other Assets

Fixed assets can also be done by exchanging other assets. The process of exchanging other assets for fixed assets is also often referred to as trade-in.

Easily if fixed assets can be obtained by exchanging old assets. If during the exchange process the old asset price is lower than the new asset, then the old asset exchange will be added to cash.

As for the recording process, it is seen based on the economic value of an old asset added to the amount of cash paid to get the latest fixed asset .

  • Obtained From Grants

Fixed assets can be obtained with a grant system. The latest fixed asset is indeed provided free of charge by the owner. However, the fixed assets obtained will still be recorded according to the market price of these assets. This recording is done solely to make it easier if one day there is a depreciation in the value of assets or fixed assets .

  • Create Personally Fixed Assets

Finally, you can get fixed assets by making them yourself. If a company is confident and able to make a fixed asset , then that can also be considered legitimate. However, the applicable recording process will be adjusted to the amount of costs incurred by a company to obtain these fixed assets .

How to Record Fixed Asset Reports

A company that has fixed assets must make a report. As previously explained, fixed asset reporting can also help a company get investors.

The process of recording reports can also be done in several ways. Starting from the manual by recording it in certain software or you can also use a special application to record fixed asset reports owned by a company.

The several steps required in recording fixed asset reporting are as follows.

  • Check All Financial Records Including Fixed Assets From the Previous Year

The first thing you can do is look at the data or records for the past year regarding the fixed assets owned by a company. At least a company has fixed assets that have been recorded in one year.

Therefore, fixed assets have a possible depreciation value, so you must also have an exact number of fixed asset depreciation values .

  • Note If There Is a Latest Fixed Asset

You must record every new fixed asset within one year in the report. To make it easier to record the initial value of these fixed assets , you can also find out through proof of payment or through receipts. Apart from that, you also have to record what benefits are provided by the fixed assets as well as the residual value.

  • Record the List of Fixed Assets That Have Been Released

If a fixed asset is released, the data on the disposal of the fixed asset must be recorded. Starting from the value of depreciation, profits or losses that are seen based on the book of goods that have been sold.

The explanation above is all related to fixed assets. Starting from the understanding, benefits, types and all matters related to fixed assets already in the explanation above. Of course, this information will help you a little to gain additional knowledge about fixed assets.

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Author: Hendrik Nuryanto

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