Fixed asset accounting deals with recording, tracking, and disposing of fixed assets such as buildings, real estate, vehicles, and equipment that represent the ‘big-ticket” items bought or acquired by an enterprise. In a very large company, a dedicated fixed asset accountant is on staff, while in smaller companies, the regular accountants/bookkeepers might have the fixed asset responsibilities incorporated into their job description.
Fixed Asset Responsibilities
The fixed asset accountant must control the expenses of large purchases for a company or institution. Among the activities of this accountant are the following:
Creating and monitoring the system of procedures for purchasing and recording fixed assets
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Relaying fixed asset accounting policies to management and recommending updates or changes
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Assigning identifying numbers or tags to new acquisitions
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Keeping records of incoming and outgoing fixed assets
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Reconciling fixed asset balances in the subsidiary ledger and transferring to general ledger
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Determining the depreciation of all fixed assets
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Calculating asset retirement obligations for applicable fixed assets
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Inspecting and noting certain fixed assets becoming obsolete
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Conducting periodic reviews of fixed intangible assets
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Advising management of potential disposition of obsolete tangible and intangible fixed assets
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Preparing fixed asset audit schedules and assisting auditors in completion of audits
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Preparing and executing property tax returns
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Acting as representative of the company during government audits of these assets
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Tracking company purchases to ensure they are within capital budget and have authorization from management
The importance of establishing and following initial protocols will bring great savings and efficiency to the company or institution and cut or reduce unnecessary losses over time. A periodic physical inventory helps to achieve the same result. Both practices and proper maintenance ensure proper function over the useful lifetime of each fixed asset.
Observant staff makes fixed asset security easier by protecting them from removal, retirement, or unaccountable disappearance and places status updates on the balance sheet for company management to track. As fixed assets age, the accounting records should also track annual salvage value and note the end year of its useful lifetime.
Fixed Asset Schedule
The company’s auditors use a fixed asset schedule to verify the existence of all fixed assets. They will trace these assets back to the general ledger for confirmation. All records will match easily if the operations and accounting departments have been working together consistently and performing regular inventories.
Fixed asset accounting requires accurate record-keeping resulting in significant savings on depreciation deductions especially during tax season. This is a difficult operation for an accountant to handle manually. However, there are programs available that provide updates for the current depreciation rules and they can provide an accuracy that maximizes savings at tax time.
Write Off a Fixed Asset
When a fixed asset no longer functions efficiently – or at all – it is time to dispose of it through parts or sale. It must become a write off by removing all traces of it from the balance sheet. The fixed asset and accumulated depreciation accounts must be equal and show a reduction in amounts.
It is helpful to have a fixed asset accounting system that includes tracking inventory, calculating depreciation and churning out accurate, precise reports. Oates & Co can configure that system for you. Contact us for more information and assistance with implementing such a system.
