Why it matters
Fixed assets affect the balance sheet, the depreciation deduction and the gain or loss when the asset is sold. A missing asset or a wrong purchase date changes the tax return.
Example
A business buys a $12,000 delivery van for cash. The van is a fixed asset, not a supplies expense, and the business depreciates it over its recovery period.
Related terms
Questions about Fixed asset
What is the difference between a fixed asset and an expense?
A fixed asset provides a benefit for more than one year and is capitalized. An expense is used up in the current period, such as office supplies or a small repair.