What is Fixed Asset?
Assets & Depreciation
Explained Simply
Fixed assets are recorded on the balance sheet at cost and depreciated over their useful life. In South Africa, businesses must maintain a fixed asset register listing each asset's description, date acquired, cost, depreciation method, and current book value. The register is essential for tax compliance (claiming wear and tear allowances) and insurance purposes. When a fixed asset is sold or scrapped, any profit or loss (difference between proceeds and book value) is recognised in the income statement.
Related Terms
- DepreciationDepreciation is the systematic allocation of a fixed asset's cost over its useful life, reflecting the asset's wear and tear, obsolescence, or decline in value.
- AmortizationAmortization is the process of spreading the cost of an intangible asset (such as a patent, trademark, or software licence) over its useful life, similar to depreciation for tangible assets.