Accounting
Fixed Asset Register : 3 things to know
Yannick Agbohoun
Accounting manager
Updated on
For a financially sound business, total assets should reflect profits. Failure indicates trouble. But, how does a business track owned assets? Enter the fixed asset register—an accounting tool recording all company-owned fixed assets. While not requiring math brilliance, business owners benefit from grasping basic accounting principles. This article offers a concise grasp of fixed asset registers, their components, and their significance for your business.
Overview
What is a fixed asset exactly? Six main types
All businesses have assets of some form or another. To determine what an asset is, simply think of anything that can generate revenue or goodwill for your business and that is wholly owned by the business. There are six main types of assets:
- Tangible assets – These are any objects owned by a business that can generate revenue and have a physical form, such as cash, furniture, office equipment, machinery and so on
- Intangible assets – These are assets that can generate revenue or goodwill and do not have a physical presence, such as branding, theme music, reputation, slogans and the like
- Operating assets – Anything that a business uses to generate revenue on a daily basis is considered to be an operating asset
- Non-operating assets – Anything that a business uses to generate revenue via means other than its core daily activities is designated as a non-operating asset
- Current assets – Anything that is expected to be consumed or turned into cash within a short time frame is considered to be a current asset
- Fixed assets – Anything that cannot be turned into cash within a short time frame and is subject to depreciation over time is considered to be a fixed asset
As we can see, objects owned by a business can be included in various categories. For this reason, only fixed assets and current assets are used in accounting records and financial statements.
Examples of fixed assets
- Equipment
- Tools
- Machinery
- Furniture
- Fittings
- Vehicles
- Real estate
- Long-term investments
- Computers
- Office equipment
What is a fixed asset register?
A fixed asset register lists all the fixed assets owned by a company or business that are currently at its disposal. All assets are assigned an individual box on a row in the register. The row will provide details on all relevant accounting information of the assets and their depreciation expenses. A fixed asset register is used primarily to track the depreciation value of the fixed assets owned by a business as compared to the acquisition market value of the items when they were first bought.
What is included in a fixed asset register?
Generally, in a fixed asset register you will find the below details:
- A description of each individual fixed asset
- The date on which the business acquired each fixed asset
- The purchase cost of each fixed asset
- The location of each fixed asset
- The actual owner/s of each fixed asset
- The person or persons who use each fixed asset
- The barcodes and serial numbers of the fixed assets
- Any insurance policies that have been taken out on the fixed assets
- The expected lifespan of each fixed asset
- The current estimated depreciated value of each fixed asset
- The expected value of each fixed asset at the end of their lifespans
Most business owners compile the fixed asset register on their own or with the help of staff. They may use specialised accounting software or a program such as Microsoft Excel spreadsheets to collate the data. Larger enterprises may enlist the assistance of a dedicated third-party entity such as a professional accountancy firm.
What are the benefits of a fixed asset register?
A fixed asset register makes it easier to keep track of what assets a business owns and what their current and expected value is. This can help to prevent theft, estimate maintenance and repair costs and make decisions about future investments in new assets. The fixed asset register assists in accounting records retention, simplifies the process of calculating depreciation on assets and can be used to update data in the accounting journal and general ledger. This data is then used to create important tax and financial statements such as the balance sheet.
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