Fixed assets are essentially long term tangible pieces of real estate. These assets are utilized by companies in their various business operations to produce an extra income. Often times referred to as the firm’s capital, fixed assets consist of items like plant and equipment. Examples of fixed assets may include furniture, plant, inventory and vehicles. These assets do not change significantly with any economic cycle; they are what is termed as enduring value.
A major portion of fixed assets is found within the fixed assets of a company. It is the job of an accountant to manage these assets on a routine and ongoing basis. Accountants perform a variety of tasks in relation to these assets. Below are some of these tasks performed by accountants:
The preparation of financial reports: This is perhaps the most basic task associated with fixed asset accounting. An accountant determines how to interpret the information found within the financial reports that he/she prepares. In order to arrive at the best possible interpretations, an accountant always performs a thorough study of the financial reports.
The identification of its useful life: When an accountant determines the useful life of a fixed asset, he/she also identifies its useful life in terms of its price or value at the purchase date. One can determine the useful life of fixed assets using either discounted cash flow or discounted assets. Discounted cash flow is considered more useful since it uses a discounted cash amount to determine the amount of cash that would be generated in a one year period. However, discounted assets calculate the value of the tangible assets immediately and do not allow for the accrual of debits and credits.
Valuation of fixed assets: By determining the value of these assets, the financial reports of an accountant to help the managers to determine whether these assets are bought according to their true value. This is because these financial reports identify the market price of each asset at a specific date in the future. It is best to conduct proper evaluations and identify the best deals. This is because a manager may decide to buy an asset today but may have to sell it within one year due to the rise in the market price.
Good bookkeeping: To ensure that an account is maintained properly, it is best to hire a professional accountant who will help you in accounting and bookkeeping. This is because only a professional will have access to all the relevant information. In addition, he/she will also know what to look for and how to identify if a certain asset has depreciated or has been improved upon. A good accountant will also be able to provide information on the different methods used to determine the value of a fixed asset. A good accountant will also help in determining the depreciation value. Proper depreciation is very important since this is the basis for computing the cost of capital for a business.
Fixed Assets Management: A spreadsheet is used to keep all the records. It is best to use a spreadsheet with the help of accounting software so that the records can be manipulated easily and also data can be imported and exported. An example is a spreadsheet that contains the information of the fixed assets, which consist of accounts receivable, accounts payable, capital assets, inventory, cost of goods sold, cost of services bought, gross selling price, net change in percent of outstanding inventory, gross receipts, free cash flow and operating expenses. This spreadsheet can be edited using Microsoft Excel to add new fields and make changes to existing fields.
There are many benefits of using a spreadsheet for fixed assets. It helps in tracking assets efficiently and effectively. It saves time and money spent for collecting and analyzing the data. It saves the administration the time needed for data entry and tracking activities. A spreadsheet can help even the most novice person in understanding and tracking assets properly.