Fixed assets are physical things owned by a business firm that is expected to be used in the business for some extended period are considered fixed assets. This would include things like land, building and machinery.
Fixed assets do not get consumed as they are used as compares to current assets which include assets like stock of raw material and finished goods, amount receivable form debtors, bank balance and cash.
Building improvements will be treated as fixed assets only when these amount to significant addition to the value of the building. In case there is no significant increase in the value of a building then these will be treated as building maintenance charges. Let us assume a hypothetical case in which a building gets damaged due to an earthquake. The expenses that will be incurred in repairing the building to its original condition will be treated only as maintenance charges, and therefor there will be no increase in the value in the book of accounts. However while repairing the building, some major improvements are also undertaken that increase the basic value of the building, then the additional expenses incurred in such improvement should be treated as investment in capital assets and the value of the building should be increased in the books of accounts accordingly.
However, to simplify the accounting process, very small expense on things that continue to give service for extended period are often treated as expenses rather than investments. For example, a stapler used in a office may by have a useful life of several years, but is not likely to be treated as an item of fixed asset.
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