What are fixed assets?

Fixed assets are long-term tangible property a business owns and uses in operations, expected to provide benefit for more than one year. Examples include office equipment, computers, furniture, vehicles, and leasehold improvements. Fixed assets appear on the balance sheet and depreciate over time, allocating their cost across their useful lives.

Capitalization thresholds

Not every purchase becomes a fixed asset. Most businesses set a capitalization threshold, often $2,500 or $5,000. Items costing less than the threshold are expensed immediately. Items above it are capitalized and depreciated. Your threshold should balance administrative burden against financial statement accuracy. Set it in a formal policy for consistency.

Tracking fixed assets over time

Maintain a fixed asset register listing each item, purchase date, cost, depreciation method, useful life, and current book value. Update it when assets are purchased, disposed of, or impaired. Conduct annual physical counts to verify assets still exist and remain in service. Write off fully depreciated assets that are no longer used.