Companies obtain long term assets such as machinery, delivery vans and computers for business use. Long term business assets are also referred to as fixed assets. The life of these fixed assets normally extends over several years. However, machinery may have longer asset life than computers equipment.
Businesses are required to recognize the wear and tear of fixed assets over the economic useful life in their accounts. The wear and tear process is normally referred to as depreciation by professional accountants.
The accounting for fixed assets in the company accounts ideally should be maintained in a form of a register normally called fixed asset register.
What Need To Be Recorded In A Fixed Assets Register?
The following information should be recorded in the fixed asset register for every asset bought for business use.
- Date of the asset was purchased
- The supplier details
- Description of the asset
- The cost of the asset
- Allocate unique reference number if the asset does not have its own serial number for easy identification by keepers and also the auditor.
- Date of the asset last revalued
- Amount of revaluation
- Economic useful life of the asset
- Depreciation policy applied to the asset whether straight line method or reducing balance method.
- Accumulated depreciation amount charge to profit and loss account so far
- Net book value of the asset
- Date and value of business assets being disposed for cash, if applicable
The net book value of the asset is to be included in the company’s balance sheet as part of the long term assets or fixed assets. Further disclosure required in the notes to the accounts of the breakdown of the cost, depreciation charge for the year and net book value of the assets. this is required by the UK accounting standard, Financial Reporting Standard (FRS) 15 Tangible Fixed Assets.
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