- With time, fixed assets lose value. These assets are expensed in a different way than other items because they generate long-term revenue. While intangible assets are subject to amortization, tangible assets are subject to periodic depreciation.
- The cost of an asset is expensed annually to a particular extent. On the balance sheet of the corporation, the asset's value drops along with the amount it has depreciated. The asset's price can then be matched with its future worth by the firm.
Advantages of Fixed assets:
- Asset-related data is useful for accurate financial reporting, extensive business assessments, and in-depth financial research. These reports are used by creditors and investors to assess a company's financial standing and make investment or credit decisions.
- Analysts must examine the notes on the firm's financial statements to learn how the numbers are computed because a company may employ a variety of recognised procedures for registering, depreciating, and disposing of its assets.
- Fixed assets are crucial for capital-intensive industries like manufacturing, which must make significant PP&E investments. A company may be operating in a mode of growth or investment if it consistently reports negative net cash flows for the acquisition of fixed assets.
Can we allow expenses/ fixed assets in purchase vouchers?
If we permit expenses and fixed assets in buy vouchers, the journal entry process for expenses incurred through the use of a purchase voucher can be bypassed. Fixed assets are expensed in various ways when compared to others as it generates revenue in a long term.