What are fixed assets?

Fixed assets refer to long-term tangible assets that a business owns which are not intended for sale in the normal course of business operations. These assets include items such as buildings, machinery, vehicles, and equipment, and they play a crucial role in the operation and sustainability of a company. Their primary purpose is to help generate revenue over an extended period, rather than being quickly converted into cash like current assets.

These assets are typically expected to provide utility to the business for more than one accounting period, and thus are recorded on the balance sheet at their historical cost, less accumulated depreciation. This approach allows a business to spread the cost of the asset over its useful life, reflecting its consumption in generating income.

In contrast, the other options describe attributes that do not align with the concept of fixed assets. Short-term investments can be categorized as current assets, while temporary items used in a business often fall into the category of supplies or inventory. Financial liabilities, on the other hand, represent obligations that a company owes to others and do not pertain to the ownership of physical assets.