Financial Accounting I

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Fixed assets

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Financial Accounting I

Definition

Fixed assets are long-term tangible assets used in the operations of a business and not expected to be consumed or sold within a year. Examples include property, plant, and equipment.

5 Must Know Facts For Your Next Test

  1. Fixed assets are recorded on the balance sheet under non-current assets.
  2. Depreciation is applied to fixed assets to allocate their cost over their useful life.
  3. Land is a fixed asset but is not depreciated because it typically appreciates in value.
  4. Impairment occurs when the carrying amount of a fixed asset exceeds its recoverable amount.
  5. Fixed assets can be financed through various means, including loans or capital leases.

Review Questions

  • Where are fixed assets recorded on the financial statements?
  • What accounting process is applied to allocate the cost of fixed assets over time?
  • Why isn't land depreciated like other fixed assets?
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