An asset register -- also known as a fixed asset register -- is simply a record that clearly identifies all the fixed assets of a business. Fixed assets refer to assets that a business uses regularly to produce its income, and unlike assets like inventory, these assets are not considered products to be sold. The register allows a business owner to quickly retrieve information on an asset including it's description, purchase date, location, purchase price, accumulated depreciation, and estimated salvage value.
EditSteps
EditPreparing To Create An Asset Register
- Learn the purpose of an asset register. Asset registers are typically used to help business owners keep track of all their fixed assets and the details surrounding them. It assists in tracking the correct value of the assets, which can be useful for tax purposes, as well as for managing and controlling the assets. A fixed asset register provides a single location to quickly learn about any asset owned by the business.[1]
- Fixed assets refer to long-term assets that are used in the production of the business' income and typically refers to things like land, machines, buildings, office equipment, copyrights, and vehicles. Quite simply, they can be seen as assets not intended for sale but rather for use in production, as opposed to something like inventory.[2]
- For example, assume a business owns a small fleet of trucks. The fixed asset register would describe the trucks (indicate color, make, model), indicate their purchase date and price, their amount of depreciation accumulated, and their estimated salvage value.
- The asset register is important for keeping track of whether or not assets are still in possession or are working, and is an important way of of keeping track of the value of your assets. It can be helpful not only for business management purposes, but should also be provided to your accountant as it is an easy way for him or her to to find information regarding the assets and their values [3]
- Identify fixed assets by looking at the balance sheet of the business. In order for a fixed asset register to be successful, it is required that the information be accurate, complete, and comprehensive. To do this, it is important to make sure all assets are included in the register.
- Look at the balance sheet of the business. Create a list of all the fixed assets that are listed and recorded here, as this indicates the assets that are currently reflected in the company's books.
- These assets will typically be located under the assets section of the balance sheet. Typically, fixed assets will including anything under "property, plant & equipment" and will include land, buildings, equipment, and vehicles.
- Note that fixed assets can also include things like patents, copyrights or brand names. These are known as "intangible assets", and can be found under the "intangible assets" portion of the balance sheet. A good tip is, if you plan on owning it for more than a year, it should be considered a fixed asset.
- Identify assets by performing a physical audit, or walk-around of the company's locations. Perform a walk-around of the business location(s) to check and make sure all the assets in the balance sheet are listed. Make special note of any assets not listed.
- If for example, you find a machine that is not recorded in the company's books, make sure you make note to include it in the register.The register should include assets both listed and unlisted in the books.
- If an asset is not in the books, it is most often because the asset has been depreciated to zero and removed from the books. That is to say, the asset's value depreciated over time until it no longer had any accounting value.
- Be sure to be thorough, and keep in mind that any piece of property that you plan on keeping and not converting into cash for over a year that is involved in the production of the company's income would be considered a fixed asset. This means things like office equipment, furniture, or fixtures would also be considered. These things are long-term, and are all involved -- although indirectly sometimes -- in the production of income.
- Decide on a method of organizing your asset register. Once you have a detailed list of all the company's fixed assets (from both a walk-around and the general ledger), it is time to create the structure for the register. Note the register can be kept physically, or digitally, depending on your preference. While there are several ways to organize an asset register, here are a few[4]:
- If you are opting for a physical asset register, one approach is to use a loose leaf binder, and simply allocate one page per asset. Each page would indicate the asset (for example, a fleet of trucks), and then list several categories of information to be filled in pertaining to the asset (these categories will be described in the next part). You can write out the pages by hand, although using a computer and printing is recommended.
- If you opt for a digital version, using a spreadsheet is a wise idea. One way to organize a spreadsheet is to have a row for each asset, and then columns for information on each asset. For example, each row of the spreadsheet Asset Register would apply to a single, specific asset such as Truck, or Milling Machine. The horizontal columns would have titles such as Description, manufacturer, serial number or identifier, date of purchase, purchase price, etc. The next part will go into detail regarding each column.
- You can also find numerous templates for asset registers online by simply searching "fixed asset register template" into a search engine.
EditCreating Your Fixed Asset Register
- Create an account record for each fixed asset. As mentioned earlier, each asset will need its own "account", or area to store the information. If you opt for a loose leaf binder, each page would feature an asset, and then various pieces of information. If you opt for a spreadsheet, each row would feature an asset. Regardless of your format, the following information is necessary for each account:
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- Description: The description should be able to distinguish the specific asset from other similar assets. For example, a company that owns multiple Ford trucks might describe them by color, model, and year of manufacture (Ford 2012 F-250 brown truck). Note whether the asset is New, Used, or Reconditioned. Include the location of the asset here as well.
- Serial number: This is the identification assigned by the manufacturer. If your company has also assigned a company ID, note that in your record.
- Date of purchase: Include the date the asset was purchased.
- Purchase price: Include the price the item was acquired at
- Insurance coverage: Include any details regarding the insurance policy for the asset, including broker name and company.
- Warranty information: If applicable, including contact information for warranty provider.
- Date asset placed in service:: List the first day of usage for the asset.
- Estimated life of the asset: Here you would include how long you expect the item to last in years, or hours. This is also known as the depreciation period, which will be discussed in detail in the next part.
- Salvage value: Include the salvage value -- that is to say, the resale value of the asset at the end of its life. In many cases, this would not apply as the asset would be used until not capable of resale.
- Depreciation method:Depreciation refers to the reduction in the assets value over time, and this can occur according to several methods
- Select an appropriate depreciation period. The depreciation period is the period during which the value of the asset will decrease. In order to determine depreciation, it is important to first know the time period the depreciation will occur within.
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- A percentage of the asset's value is converted from an asset to an expense at the end of each accounting period during the depreciation period of the asset. The amount of the asset's value that is expended in each accounting period is determined by the depreciation method, which is explained later.
- The depreciation period is based on the projected useful life of the asset. Contact the manufacturer to determine this specifically.
- Often, the depreciation period for a specific asset is dictated by tax regulations. Confirm this with tax authorities.
- Determine the most appropriate depreciation method. Since each asset depreciates over time, it is important to know what the common depreciation methods are, so it can be indicated on the fixed asset register.
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- Similar to the depreciation period, allowable depreciation methods are often dictated by tax authorities.
- Straight-line is a very common method for depreciating assets. With this method, the percentage of the value of the asset that is depreciated is the same in each period. For instance, if an asset has a depreciation period of 5 years, then, under straight-line depreciation, 20 percent of the asset value will be converted to expense each year.
- Accelerated depreciation methods increase expense realization in the short term, which results in lower net income in the early depreciation periods of the asset. This shifts depreciation expense from later periods to earlier periods and has the effect of deferring tax expenses to the later periods. Note, however, that accelerated depreciation also reduces shareholder equity more rapidly. Contact an accounting professional to determine if this method is right for you, as it can have certain tax benefits.
- The depreciation method cannot be changed once an asset is placed into service and a depreciation method is applied to it.
- For further clarification on this, consult an accounting or bookkeeping professional.
- Conduct periodic audits to verify the accuracy of the fixed asset register. Each year, ensure the accuracy of the register by doing a physical inventory check. As mentioned earlier, compare physical assets with assets on the books, and make sure that the asset register is always up to date
- Assets that have been lost, stolen or have become nonfunctional no longer have value to the organization and, therefore, the remaining book value of such assets must be written off. It is very important, however, to keep all records whether or not the asset has any value, or is in use or not.
EditSources and Citations
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