Understanding Fixed Assets and Depreciation in Accounting

🏢Fixed assets, also known as long-term assets, are tangible assets used in a company's normal course of business.

⏳Depreciation is the process of allocating the cost of fixed assets over their expected useful lives.

💼Depreciation expense supports the matching principle, which matches the cost of fixed assets to the revenue they generate over time.

🏗️Examples of depreciable fixed assets include buildings, machinery, vehicles, furniture, and fixtures.

🌱Land is not depreciable as it tends to appreciate and does not suffer wear and tear.

What are fixed assets?

—Fixed assets, also known as long-term assets, are tangible assets that a company owns and uses in its normal course of business.

What is depreciation?

—Depreciation is the process of allocating the cost of fixed assets over their expected useful lives.

Why is depreciation important?

—Depreciation is important because it supports the matching principle, which matches the cost of fixed assets to the revenue they generate over time.

What are examples of depreciable fixed assets?

—Examples of depreciable fixed assets include buildings, machinery, vehicles, furniture, and fixtures.

Why is land not depreciable?

—Land is not depreciable because it tends to appreciate and does not suffer wear and tear.

00:00Fixed assets, also known as long-term assets, are tangible assets used in a company's normal course of business.

01:36Depreciation is the process of allocating the cost of fixed assets over their expected useful lives.

02:59Depreciation expense supports the matching principle, which matches the cost of fixed assets to the revenue they generate over time.

03:56Examples of depreciable fixed assets include buildings, machinery, vehicles, furniture, and fixtures.

04:22Land is not depreciable as it tends to appreciate and does not suffer wear and tear.