Fixed Assets & Fixed Capital

Fixed Assets:

Fixed assets are also called as PPE (Plant, property and equipment) or non current assets, it a term which is used in the accountancy for property and assets that cannot be converted into cash. This could be related with the current assets like bank accounts or cash that are defined as liquid assets. Generally, only the tangible assets are considered as fixed.

In addition, non current or fixed assets could also be described as an asset which is not directly sold to the end users or firm’s consumer. For instance, a baking company’s current assets will be its inventory (i.e. in this case, yeast, flour, sugar etc.), the value of the sales owed to the company through credit (that is, accounts receivable or debtors), cash held in the bank, etc. Its fixed assets will be the micro oven which is used to bake cake or bread, cash registers that is utilized to handle cash payments, vehicles utilized to transport goods or deliveries, etc.  Each above mentioned fixed asset is not sold directly to the customers.

Fixed Capital:

The capital invested in fixed or permanent assets such as land and buildings, plant and machinery, furniture and fixtures, etc., is known as fixed capital or block capital. Fixed assets are those which are required for permanent use and are not meant for resale. These assets are not fixed in value but they are needed for long term. These are not convertible into cash within a year. Fixed capital is used again and again to generate revenue for the firm. Fixed capital provides the foundation of a business and acts as cushion to absorb shocks of the business. In order to find out the amount of fixed capital, a list of assets has to be prepared. Then a survey of sources of supply of these assets has to be made to find out the estimated cost of each of the fixed assets.  If some of the fixed costs have to be imported, their cost should be converted from foreign currency into home currency.

Questionnaire:

• What are Fixed Assets?
• What is Fixed Capital?
• What is the difference between fixed capital and fixed assets?