A fixed assets register is a catalog of a business's fixed assets, carrying details like their purchase price, depreciation values, and current location to document the course of their useful life accurately. It helps a business maximize the utility of its fixed assets such as machinery, building, vehicle, and the like.
A business owner deals with different types of assets such as machinery, vehicles, current stock, cash, etc., to produce goods and services. Any equipment or property that a company owns and uses over a long period to generate income or keep itself operational is known as a fixed asset.
Many details accompany a fixed asset throughout its useful life including its purchase price and date, location of existence, depreciation rate, yearly depreciation value, maintenance cost, servicing date, insurance details, and salvage value.
If a business fails to keep track of such information, it may lead to losses. For instance, a pizza delivery company delivers food to its customers using vehicles. Five of its vehicles break down in the middle of a busy day. A close examination found that they have been rendered obsolete as they were not taken for timely servicing in the last two years. An absence of ready-made data like an upcoming servicing date led to their overuse and a subsequent loss for the firm.
As such, you must maintain a fixed assets register, regardless of the size of your business. It helps enhance efficiency, maximize the utility of an asset, avoid duplicate purchases and attain hassle-free auditing.
Whether or not an item is included in the register will depend on what it is used for. For instance, a delivery truck would be considered a fixed asset for a courier company, but it would be an inventory item for a truck manufacturing business. The courier company will use the truck for operational purposes, while the truck manufacturer will sell it for a profit.
However, some typical assets included in the register are –
There are numerous ways in which your business will benefit from having an accurate and up-to-date fixed assets register. Some of these ways are as follows:
By maintaining a register, you will have all the relevant details about the location, usage, life cycle, and maintenance costs of each company asset at your disposal. This information will help you make informed decisions about efficiently utilizing your company’s fixed assets and when to dispose of them.
It will provide a business with all the required information about the location, operational status, and expected life cycle of any given asset. It will ensure the security of these assets and prevent theft or misplacement, as you will always know where each asset is located and whether or not it is still functional.
With a well-maintained register, you will always know when special equipment was purchased. You will also learn how long it has been in use, how well it performs, and when its expected life cycle will end. It will help you accurately predict future maintenance costs for the tools and machines used to function your business. It will also assist in creating a budget for these expenses in advance. Also, for future purchases, this will help decision-making as the assets with a high maintenance cost can be avoided.
The register will help you calculate the real value of your company's property and equipment. It is facilitated by keeping track of purchase date, purchase cost, depreciation rates, and salvage value. It will ensure that the values on the life span of an asset remain correct. It also gives enough time for an organization to arrange for replacement without affecting the flow of operations.
It provides precise information about each asset's cost, depreciation, and current value. Such information helps a business comply with your country's statutory regulations. It, in turn, will enable the business to avoid the fines and penalties associated with compliance violations.
When auditors inspect the account books of your business, having an accurate and up-to-date fixed assets register will simplify the audit and verification process. In Wilson County, Tennessee, it was recently reported that the state comptroller’s audit found significant accounting errors. The amount added up to about $14 million.
Many issues in the calculation of accumulated depreciation led to these problems. Some assets were depreciated on the inaccurate acquisition date, others were not depreciated, and a few were depreciated in excess.
The format of the fixed assets register varies depending on your needs. A few decades earlier, businesses used to maintain manual, paper-based records of all their fixed assets. These records were updated from time to time by a bookkeeper. Nowadays, many such registers are electronic. There are many software applications to help with the management of fixed assets. Some popular names are Upkeep, AssetCloud, etc.
Depending on your business’s size and nature, you can choose to maintain your register on an excel spreadsheet or a specialized fixed asset management software. The method that enhances the efficiency and cost-effectiveness of your business is the one that you should opt for.
There is no universal template or format for how a register should be maintained. The extent of details included about each asset will depend primarily on your country’s laws and the requirements of your management team.
For small businesses, the register could be a single Excel spreadsheet. Large, multinational companies could use complex software products to keep track of all their assets across diverse geographies. A sample format looks something like the picture below.
Kindly note that the template above is an example of fixed assets registers and must not be considered binding. The format varies as per organizational needs.
There are, however, certain categories that are found in most registers. This is because these categories have proven useful in keeping track of assets and calculating their value over time. They are listed below.
This has been a guide to a Fixed Assets Register and its definition. Here we discuss how to prepare this register along with its benefits and its format. You may learn more about financing from the following articles –
