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What Are Gross Fixed Assets?

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Last editedJan 20232 min read

Fixed assets form an essential part of a business’s financial statements. Part of small business accounting involves calculating the total cost paid for fixed assets – a measurement known as gross fixed assets. So, what are gross fixed assets in business accounting, and how are they calculated? We’ll list some examples in this guide.

What are gross fixed assets?

Gross fixed assets is a term used in accounting to reflect the total price paid by a business for its fixed assets. These include things like machinery, equipment, property, and other items owned and used by the business. To calculate gross fixed assets, you’ll need to know the price for all these items and add them together to reach the total amount. Fortunately, this should be easy to find on your company’s financial statements like the balance sheet.

What qualifies as a fixed asset?

Before you can start calculating gross fixed assets, you need to know what qualifies as a fixed asset. A fixed asset is any long-term, tangible property used in business operations and listed on the balance sheet Here are a few characteristics of fixed assets:

They can be used for at least one year.
They are classified as property, plant, and equipment (PP&E).
They usually depreciate over time due to wear and tear.
They are not easy to convert to cash, making them illiquid.
They are used as part of business operations to generate revenue.
They are not held for investment purposes but are used in production.

What is the gross fixed assets formula?

The gross fixed assets formula is straightforward, since you’re simply adding together the total price paid for all fixed assets. In written form, it looks like this:

Gross Fixed Assets = Sum of Fixed Asset Costs

How to calculate gross fixed assets

Now that you know what qualifies as a fixed asset, it’s easy to calculate gross fixed assets.

Step 1: Pull together a list of all the fixed assets owned by your business. These should appear on the balance sheet under the PP&E section, or property, plant, and equipment. The list will include all equipment, machinery, buildings, and land that your business owns.
Step 2: Find out the price that your business paid for each fixed asset. The gross fixed assets formula doesn’t take depreciation into account; it looks solely at the original price paid. You should find this in your accounting books under receipts or expenses.
Step 3: Add the prices together to determine the gross fixed assets value.

Here’s an example of how to calculate gross fixed assets. Imagine that your business paid the following for its fixed assets:

Manufacturing equipment: $50,000
Warehouse space: $250,000
Company vehicle: $10,000
Land: $50,000

The sum of these fixed asset prices, or gross fixed assets, is therefore $360,000.

Why should you track gross fixed assets?

Calculating gross fixed assets is simple, but why is it so important? It’s one of the figures that investors will ask for when determining the financial health of your company. Though it doesn’t take depreciation or intangible assets into account, gross fixed assets are still a useful snapshot of what your business owns. You can also use this figure as a jumping-off point for calculating how efficiently your business is using its fixed assets. Has there been sufficient return on this investment?

Accounting software makes these calculations more accurate and efficient, with automatic reconciliation and report generation. GoCardless partners with over 300 integrations, including top accounting software like Xero and others. This means you can merge your payments and billing with accurate recordkeeping. Gain a birds’ eye view of assets and expenses, all from a central dashboard.

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GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.