I met someone the other day who didn’t understand the headings in a businesses Balance Sheet – and why should they – no-one ever teaches you! (Unless you are a bookkeeper or accountant that is!)
So I am doing a series of blog posts explaining the main headings in the Balance Sheet – what they actually mean…I hope you find the series useful.
And today I am starting with Fixed Assets.
Fixed Assets can also be called tangible assets. These are the big things – the motor vehicles, the plant and machinery, the computer equipment. They are the things that you spend money on, that are not for resale, they are for continued use in the business, generally for at least 2-3 years.
The value for Fixed Assets which is shown in the Balance Sheet is the purchase price, less depreciation.
Depreciation is a yearly charge that is make – it is the writing down of the value of each asset, over it’s useful life (for most fixed assets that 3 years).
I hope that makes things a little clearer when looking at Fixed Assets in your Balance Sheet.