What is a fixed asset?

By Book Keeping Pros
Sources checked 15 Oct 2026

Definition

A fixed asset is a physical item a business owns and keeps to use in running the business over the longer term, rather than to sell to customers. Examples include tools and equipment, vehicles, furniture, computers, fit-out and land or buildings. On a balance sheet, fixed assets are shown separately from current assets.

What makes an asset fixed is how the business uses it, not what it is. A van used for deliveries is a fixed asset for a plumber, but the same van on a car dealer's lot is stock for sale. Fixed assets are also physical: goodwill or intellectual property is an intangible asset, a separate group.

In the books, a fixed asset usually has its own asset account in the general ledger, rather than being recorded as an everyday expense. A business can also keep an asset register, a list showing each item, when it was bought, what it cost and where the purchase records are kept. How a fixed asset is treated in the accounts after that is a question for your accountant.

Apart from land, the cost of a fixed asset is generally spread over the years the business expects to use it, through depreciation. Each period, part of the cost is recorded as a depreciation expense and added to an accumulated depreciation account, which sits against the asset on the balance sheet. Cost less accumulated depreciation gives the asset's carrying amount. When the item is sold or scrapped, both balances are removed and any difference from the sale price is recorded as a gain or loss. Which method and useful life apply to each asset is settled with your accountant.

In Australia

business.gov.au defines a fixed asset as a physical asset used in running a business. Its balance sheet template describes fixed assets as long-term assets a company owns and uses in its operations, and lists leasehold, property and land, vehicles, equipment and tools, and furniture and renovations. Its glossary also counts plant and equipment, such as machinery, vehicles, computers, tools and fit-out, as fixed assets, and describes depreciation as spreading an asset's cost across its useful life.

Its record keeping guidance includes records of all expenses related to your assets or stock among the records a business needs to keep.

Its guidance on improving cash flow notes that assets such as vehicles, equipment or property can cost a lot, and suggests leasing or hiring an asset you only need for a short time and selling assets you no longer need to free up cash.

Worked example

Illustrative example: a simple fixed asset register
Asset	Date bought	Cost (AUD)
Delivery van	14 Aug 2025	38,500.00
Laptop computers	3 Feb 2026	4,200.00
Shop counter and shelving	20 Mar 2026	6,750.00
Total		49,450.00

Illustrative example only: these rows show the method and are not sourced data.

Common mistakes

Recording a large equipment purchase as an everyday expense without asking your accountant how it should be treated.
Keeping no list of fixed assets, so items that have been sold, lost or scrapped stay in the books.
Counting stock held for sale as a fixed asset.
Recording money from selling an old vehicle or machine as sales revenue, instead of as the disposal of a fixed asset.
Updating the asset register when an item is scrapped but not the general ledger, or the reverse, so the two records no longer match.

Common questions

What is the difference between a fixed asset and a current asset?

A current asset is cash, or something expected to turn into cash within 12 months, such as stock for sale and money customers owe. A fixed asset is kept for use over a longer period and is not meant to be sold in the ordinary course of trading. The split matters on the balance sheet: current assets are set against current liabilities to give a view of whether short-term bills can be met, while fixed assets show what is tied up in equipment and property.

Is a fixed asset an expense?

Not when it is bought. A fixed asset is generally recorded in an asset account at cost, because the business will use it for years. Its cost then reaches the profit and loss statement gradually, as depreciation expense over its useful life. Low-cost items, such as small tools, may be expensed straight away under a policy agreed with your accountant, who also settles how any particular item is classed.

Why is it important to keep a fixed asset register?

A fixed asset register matters because it keeps the item-by-item detail behind the general ledger's totals, including depreciation to date and where each item is kept. That makes it possible to check that equipment in the books still exists, work out depreciation each period, record sales and disposals correctly and support an insurance claim if something is lost or stolen. Comparing the register's totals with the ledger also shows when an entry has been missed.

What is the difference between a fixed asset and repairs and maintenance?

Repairs and maintenance keep an existing asset working as it did, such as servicing a van or replacing a broken part, and are generally recorded as an expense in the period. Spending that buys a new item, or that improves an existing one beyond its original condition or extends its life, is generally added to a fixed asset account instead. Where a particular cost falls can take judgement, so it is a question for your accountant.

Related terms

Related service

Small business bookkeeping

Your books kept current, every month.

More about small business bookkeeping

Sources

Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
Set up a balance sheet
business.gov.au, Australian Government. Current at 15 October 2026, released 18 January 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
Record keeping
business.gov.au, Australian Government. Current at 15 October 2026, released 7 November 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
Improve your cash flow
business.gov.au, Australian Government. Current at 16 October 2026, released 20 May 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.