The term fixed assets is used to describe long-lived assets acquired for use in the operation of the business and not intended for resale to customers. Major categories of fixed assets are tangible and intangible. Examples of tangible assets are land, building, machinery, furniture, vehicles etc. Goodwill, brand value, trademarks, patents etc are the intangible assets. The term intangible is used to describe an asset lacking in physical substance.
Depreciation is mainly applicable to tangible fixed assets.
Reader should note that companies generally have a policy about depreciable fixed asset. Thus a pencil sharpener worth five rupees, though technically a fixed asset, is not treated as such and is treated as revenue expenditure for its full value but a building worth a few million rupees is treated as a fixed asset to be depreciated over the years. Treatment of pencil sharpener as revenue expenditure is mainly for accounting convenience. Fixed assets, with the exception of land, are of use to a company for only a limited number of years, and the cost of each fixed asset is allocated as an expense during the years it is used. The term 'Depreciation' is used to describe this gradual conversion of the cost of a plant asset into expense.