The identifying features of Fixed Assets

It's not always obvious to business owners whether expenditure is of a capital nature and should be recognised on the balance sheet as a Fixed Asset (aka Non current asset) or whether it is revenue expenditure and should be expensed to the Income statement (aka Profit and Loss).

These are some characteristics of Fixed assets to look out for when making this distinction:

1. a long useful economic life (UEL), i.e. several years

2. not purchased for resale (i.e. are not stock in trade)

3. are used by the business to operate

4. tend to be represented by more expensive, one off expenditure

5. are not typically liquid in nature (i.e. are not readily converted into cash)

6. can be both tangible or intangible

© 2018 by Giovanna (Jo) Larice