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Learn all about Fixed Assets & Capex


Fixed Assets & Capex

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➡️ What are Fixed Assets?


Fixed assets are physical assets that are utilized over a long period of time


These assets often times can’t get easily converted to cash


➡️ What’s Capex?


Capex stands for Capital Expenditures, and it represents the $$ used to acquire Fixed Assets


➡️ What are some examples of Capex?


🔧 Machinery & Equipment

💻 Laptops

🏨 Buildings / Land

🛋️ Furniture


➡️ How do Fixed Assets & Capex Get recorded?


Since fixed assets are used over multiple periods, they get capitalized on your balance sheet


When you make a purchase:


Debit Fixed asset

Credit Cash


Fixed assets then get expensed as the benefit is used via an account called Depreciation / Accumulated Depreciation


Debit Depreciation Expense

Credit Accumulated Depreciation


I’ve seen some companies record accumulated depreciation for each fixed asset type, while others record 1 combined accumulated depreciation account for all fixed assets


➡️ Why can Capex be so tricky?


A few reasons…


1️⃣ There are different depreciation methods (Straight line & Double declining often the most popular)


2️⃣ Capex may result in a large cash outlay, but because it doesn’t show on your P&L, it may be missed


3️⃣ There are different rules for depreciation methods used for tax purposes vs GAAP


Capex can be a large piece for one company, and a small piece for another - it all depends on your what exactly your business does


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