Fixed Asset
Definition
A fixed asset is a long-term asset the business uses to operate, such as equipment, furniture, or a vehicle. Fixed assets are depreciated over their useful life.
Example
Northstar Creative buys a $12,000 piece of equipment expected to last five years. It is recorded as a fixed asset and depreciated over time.
Why It Matters
Fixed assets are different from expenses. Recording them correctly affects both the Balance Sheet and the P&L over multiple years.