What is a fixed asset?

The modern accounting system requires differentiate between fixed and current assets. This article indicates what they consist of and how to proceed for their amortization.

What is the fixed assets of the company

He fixed asset represents all goods and rights what's wrong with it a company that cannot transform into liquid in less than a year. It is important to say that this is a situation that is assumed in accounting, without necessarily having to happen. As a general rule, you have to work with a principle of predictability.

Double-entry accounting requires dividing the assets into two sections. He asset is made up of the goods and rights, Meanwhile he passive Are the debts and obligations. It is necessary to remember, in addition, that to every game it is necessary to add a counterpart to it. A balance sheet must balance and the sum of the assets must be the same as the sum of the liabilities. If not, something has gone wrong.

The double-entry bookkeeping method, as we know it, stems from the Renaissance. The first Globalization, which originated in the 15th century, extended this system in the Mediterranean and, later, in the Atlantic. The T method, which includes a debit and a credit, has been standardized throughout the world.

Today's reference document is the General Accounting Plan (PGC) of 2007. And what are the different assets that a company has? The truth is that there are several types.

financing beyond banking
 

The different assets of companies: fixed and current assets

The division between fixed and current assets is taken for him term in which these can be turn into liquids. Not in vain, this is the element that will allow you to know what is the criterion to distinguish one mass from the other.

Time is a fundamental element because it serves to know what the real state of a company is. An indebted company is one that cannot meet its debts with fixed assets. The solvent company is one that can respond to its short-term debts with fixed or current assets.

The fixed assetsIn principle, they would take more than a year, which does not happen with the current. This information is important to make a consistent classification.

fixed asset

The goods and rights that are considered fixed assets are of various types. This section is used to include the buildings, land, machinery, office supplies either patent rights. Other items that can be included bonds waves Actions of subsidiaries or affiliated companies. All these elements are not designed to become liquid before one year. What is understood is that they are strategic assets that are going to be owned for a long period of time.

The idea of the fixed asset is that it is less than the liability in the long term. This will mean, in practice, that the financial sustainability of the company is not compromised.

current assets

He current assets encompasses the goods or rights that can be convert into money within a year. The consequence is that it would be easy to dispose of the liquid amount. This section would include the commodity of the company, the cash, checking accounts waves customer debts. Current assets are, therefore, possibilities of short-term liquidity and are essential for the company's ordinary operations. 

Current assets are essential for the company to respond. The idea is that current assets are greater than short-term liabilities. If the situation is the opposite, there may be structural problems in the balance sheet.

How the asset is depreciated

The depreciation of assets It has a certain pattern set by the Administration. It is extremely important not to confuse amortization with depreciation, although the error is frequent. This distinction is essential to avoid making mistakes.

The amortization is set with some fixed criteria annual that establishes the Government. The usual thing is that the The Ministry of Finance publishes amortization tables each year. The calculation must be done based on the acquisition value, its useful life and the residual value. It is possible that, based on exceptional events, these variables may change. This criterion will be applied on a tangible fixed asset.

The depreciation is applied in the intangible fixed assets and, as a general principle, it will affect patents. The calculation system would be similar, but keep in mind that in this section there are usually more changes. Not surprisingly, patents can become obsolete depending on technological changes.

Conclusion

Know what is a fixed asset, the difference with the working capital and the way to amortize it is fundamental to have some accounting bases. This is the way to avoid problems. Knowledge is essential to work better and be competitive.

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