According to dear Mr. Wilson Mizner: “If you count all your assets, you always show a profit”. Assets are reported on a company's balance sheet and are bought or created to increase a firm's value or benefit the firm's operations.
An asset is usually thought of as something that can generate cash flow, reduce expenses, or improve sales in the future. This is why finding the right tool to help keep track of records like a fixed asset register, especially if your company is growing, is essential. You’ll be able to determine and calculate depreciation for tax purposes.
Read to find out more.
What is a fixed asset?
A fixed asset is a tool used by businesses to create income, increase business financial health and wealth, and attract and retain customers.
Fixed assets are typically land, buildings, furnishing, IT equipment, and more. They are noncurrent assets recorded in the balance sheet to see how they have depreciated over time.
What is a fixed asset register?
A fixed asset register known as fixed asset registration is an accounting tool that recognizes all the fixed assets of a company. It keeps a list of the multiple assets owned by a business and summarizes the accounting and depreciation expenses. The register information is recent to keep up with asset purchases, their disposals, or changes to asset-related policies.
In this fixed asset register, you will normally find details about the assets like:
- What it is (the type of asset): you could add code names to the items and briefly explain what they are,
- the location: where the asset is located on the company’s premises,
- the price of its purchase: that is to say
- the date of the purchase of the asset: meaning when the asset officially belong to the company as the creation, might be considered as another value
- life of the asset within the business,
- the depreciated value of assets after a certain period,
- expected value at the end of its useful life.
The list of assets is kept to track their value and depreciation over a specific time. It also simplifies the items’ identification in the business by accrediting a different identification number or code to each item.
How do you prepare a fixed asset register?
Unlike big companies that have the possibility to hire or have teams of auditors and bookkeepers to deal with their assets, it is different for small businesses.
Small and medium companies generally keep track of their assets by themselves or independently. For example, they could request the help of Excel spreadsheets to track their type of equipment, which companies would have to create themselves.
A fixed asset register simplifies recording additions, disposals, revaluations, etc. It immediately calculates per month depreciation charges of the year, tax balances and consists of an automated journal report. It is also beneficial to keep your fixed asset register information current and up-to-date.
What are the different types of fixed assets registers?
There are many factors to the different types of asset registers. It depends on the size of the company and its operations. Their type can be paper, spreadsheet format, software, etc.
For example, small businesses usually have one register which holds the data of all the assets and in this case, it is called an asset register. But, there are always exceptions, as fixed assets that are also movable can be included.
Larger companies, on the other hand, tend to have up to 3 different types of asset registers, such as IT and digital. Therefore, the type of register will affect the asset data that is stored.
What form of data can be found in an Asset Register?
Data Found in an Asset Register
- Description of an asset: once again with an overview of the asset.
- Purchase date: it is the date that the company bought the asset.
- Purchase cost: it is the amount the company spent on the asset.
- Location of assets: it is where the asset is situated on the premises of the company.
- Owner of assets: the owner or entity the asset is under. It could a person or a group of people.
- The user of assets: it is the person who has the right to use the asset for their tasks.
- Barcode or Serial Number of assets: it is the readable parallel bars or numerals and characters that identify the asset. It makes it easier for companies to find the information of the asset.
- Insurance coverage: the insurance policy the asset is under.
Data you can find in an IT Asset Register
Here is what can be found in the IT asset register:
- Type of Asset: which is classified as Hardware or Software Asset. Hardware is machinery, tools, equipment, PCs, printers, and related accessories. Whereas, software consists of computer programs.
- Location of the Asset: On-premise, Private, Public, or Hybrid Cloud that uses a combo of private and public cloud servers.
- Operating System: what software the computer uses to run programs to perform its main functions.
- License Renewal Date: the date the license needs to be renewed to continue using the program. It is usually required to do it, to get upgraded versions of the services offered.
- License start date: it is the date when the users have access to the software.
- The user: the person who uses the asset.
- Cyber Insurance Coverage: information about the asset’s protection to protect from a data breach. Insurance is quite important when it involves account numbers, credit card numbers.
- A depreciation method that was used: it generally applies to hardware which concerns the asset’s decrease in value over the years.
Data to be found in a Digital Asset Register
It is everything you can find in the previous asset registers, except in digital form. For example, you will have:
- Digital Insurance Cover: it is the asset’s protection.
- Asset Format: whether the assets come in PNG, JPG, or TIFF formats
- Preservation Risk: it is the risks the assets could face. Those risks could be, for example, cultural, organizational, and technological.
- Type of Digital Asset: the digital asset could be audio, visual, or graphic.
- Estimated Value of Digital Asset: it is for assets that can be used outside the company’s framework. Digital assets can also be given an amount of value by the company.
Benefits of fixed asset registers
There are many benefits to possessing and keeping count of fixed assets, they are:
- Complete information provided on asset status, from the history to the location for audit trail,
- helps to meet and comply with statutory requirements like IFRS, GRAP, and SOX,
- make sure that the balance sheet indicates an accurate fixed asset value,
- gives you an accurate reference to assure that the level of insurance is correct to avoid any overpayment,
- simplifies the task for auditors and the audit and verification process in general,
- aids in calculating the annual depreciation,
- preventing theft of assets,
- helps evade the duplication of assets,
- surveying gross book value and the net value of assets,
- determining the value of the business.
Now that you know the benefits and what they are, you’ll keep your fixed asset register in check. Or you could face the wrath of the asset audit cross-checking. Avoid it and increase your company’s value.