In accounting, which item is considered a fixed asset?

A fixed asset is defined as a long-term tangible asset that a company owns and utilizes in its operations to generate revenue, typically over a period of more than one year. These assets are not intended to be converted into cash or sold in the normal course of business and generally have a useful life extending beyond a single accounting period.

Machinery fits this definition perfectly as it is a physical asset used in the production process or in providing services, allowing the company to operate efficiently and effectively. The machinery maintains value over time and is depreciated over its useful life, reflecting the wear and tear it experiences during its use in business operations.

In contrast, items such as inventory, cash, and accounts receivable do not qualify as fixed assets. Inventory is a current asset because it is intended to be sold within a year. Cash, being a liquid asset, is used for immediate transactions and is not a long-term investment. Accounts receivable represents money owed to the company by customers for sales made on credit, also categorized as a current asset as it is expected to be collected within a short period. Each of these alternatives serves different purposes in a business's financial strategy, distinguishing them from fixed assets like machinery.