What is Fixed Assets Accounting?
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Accounting for all the tangible assets a business requires to run their business is called Fixed Asset Accounting. This includes all the physical items such as desks, vehicles, property, plant, and equipment that cannot be easily converted into cash but has a quantifiable value. The more you use your assets, the more they become obsolete and this can be legally expensed on your financials for taxation purposes.
How to manage your company’s fixed assets?
You need to track the value of each asset for both accounting and taxation purposes. The South African Revenue Services (SARS) requires that you depreciate your fixed assets using a reasonable depreciation rate and method. Fixed assets include all property, plant, and equipment (PP&E), and excluded all intangible assets. An asset’s carrying amount is usually not included on your balance sheet and must be calculated. It is generally lower than the asset’s current market value. It’s also important to consider that the asset’s current market value may be higher or lower than the initial cost of the asset.
For insurance purposes, you may also want to update the replacement value of your assets on a regular basis. In situations where you may have sold or disposed of a fixed asset, you are required to record it accurately.
With software like the Sage Fixed Assets Accounting Module, you can maintain an accurate fixed assets register that records information such as date of purchase, date of disposal, purchase price, accumulated depreciation, net book value, profit or loss on the sale, etc.