What are fixed assets

The activities of a manufacturing company is impossible without the participation of fixed assets. They directly participate in the production process and gradually transfer their value to the finished product.

The concept of fixed assets

Fixed assets are part of the property of the company, which is used in the form of labor in the production process or in the provision of services. The expected life of fixed assets is at least one year or one operating period. From fixed assets it is necessary to distinguish raw materials, packaging, fuel, etc. They are called working capital.

Fixed assets are part of non-current assets. To acquire and increase the size and useful properties of the enterprise, he needs to make investments, which are also called capital investments. It is the value of the profit received for each ruble of investments that most often measures the efficiency of using fixed assets.

Each industrial sector has its own set of fixed assets. For example, for the wood processing industry, these are chainsaws, sawmills, woodworking machines and paper machines.

The main types of the enterprise include the following varieties: machines, equipment, devices, computers, vehicles, tools, implements, livestock, plantings.

In addition to production, distinguish also non-production fixed assets. Among them are buildings, structures and other means (libraries, hospitals, etc.). Their distinctive feature is that they do not directly participate in the production process, but they affect the efficiency of using the enterprise’s capacities.

The term of use of fixed assets and their depreciation

Under the term of use of fixed assets is understood the period during which their use should bring income. During operation, fixed assets are subject to moral and physical wear and tear. In the first case, we are talking about the loss by buildings and structures of part of their value due to the development of scientific and technological progress. Physical deterioration is a consequence of the active operation of the equipment and the impact of natural forces.

The cost of fixed assets is repaid by depreciation. It is defined as transferring the value of an object to the cost of providing services or performing work. The residual value of fixed assets is obtained as the difference between their initial value and the amount of depreciation.

Depreciation can be carried out in a linear way (by reducing the balance by the number of years) or by writing off in proportion to the volume of production.

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