The register of depreciable assets, also known as the fixed assets book, is simply a list of all the fixed assets of a company. These assets are regularly used as tools for producing the company's income and, unlike inventory assets, they are not intended for sale. The register allows the owner of a company to quickly retrieve information relating to an asset, such as the description, the date of purchase, the location, the original cost, the accumulated depreciation and the estimated recovery value.
Steps
Part 1 of 2: Getting Ready to Make an Asset Book
Step 1. The purpose of the depreciable assets register is usually to help business owners keep track of fixed assets with their respective details
It is used to detect the precise value of the assets, which can be useful for tax purposes, as well as for the management and control of fixed assets. An asset book contains all the assets owned by the company in a single location.
- Fixed assets are durable goods, used for the production of the company's income and usually refer to assets such as land, machinery, buildings, office furniture, brands and vehicles. Put simply, they can be considered goods not intended for sale, but tools used for the purpose of production, as opposed to inventory goods.
- For example, suppose a company has a small fleet of trucks. The asset book will describe the truck (color, brand, model), the date and cost of purchase, the amount of the accumulated depreciation and the estimated recovery value.
- The register of depreciable assets is important for keeping track of assets that are still present in the company and functioning, or not, and represents an efficient system for tracking their value. It can be useful not only for business management purposes, but should also be provided to the company's accountant, so that he can easily identify information regarding the assets and their respective values.
Step 2. Identify the fixed assets by taking a look at the company's balance sheet
For a record of fixed assets to be correct, the information contained therein must be accurate, complete and complete. To do this, it is important that all fixed assets are included in the register.
- Take a look at the company's balance sheet and draw up a list of the listed and registered fixed assets, since the balance sheet shows the assets that are currently in the company's accounting books.
- These assets are usually placed in the fixed assets section of the balance sheet under the heading "Property, plant and equipment" and include land, buildings, equipment and vehicles.
- Note that fixed assets may also include assets such as patents, copyrights or trademarks. These are the so-called "intangible assets" and can be found in the "Intangible assets" section of the balance sheet. A useful tip: if you plan to use the object for more than a year, you should consider it a fixed asset.
Step 3. Locate fixed assets through a physical check
Take a tour of the company premises to check that all the assets in the balance sheet are listed. Make a note of any not listed.
- For example, if you find a machine that is not registered in the company's accounting books, be sure to enter it in the register. The latter should include both the fixed assets listed in the accounting books and those not listed.
- If a fixed asset is not present in the books, it is often because its book value is zero and therefore it has been written off. That is to say that the asset has undergone a devaluation over time, until it has no book value.
- Try to be scrupulous: any investment that you plan to keep and not convert into cash within a year, and which represents a tool for the production of corporate income, should be considered a fixed asset. This means that you should also consider assets such as office equipment, furniture or systems. These goods are durable and are all involved, albeit sometimes indirectly, in the production of income.
Step 4. Find a way to organize your fixed assets register
After you have a detailed list of the company's fixed assets (thanks to a tour of the company and the ledger), it's time to create the register structure. Note that you can keep a physical or digital record, depending on your preferences. While there are several ways to organize a fixed asset register, here are a few:
- If you opt for a physical ledger, you could use a loose-leaf binder and simply use one page for each asset. On each page you should specify the asset (for example, a fleet of trucks) and then list the relevant information categories (these categories will be described in the next part). You can fill in the log manually, although it is preferable to use your computer and printer.
- If you opt for the digital version, it makes sense to use a spreadsheet. A great way to organize a spreadsheet is to use a row to enter the asset and columns to enter the respective information. For example, each row should be intended for a single immobilization, such as a truck or milling machine. The columns should have titles such as Description, Manufacturer, Serial Number, Purchase Date, Original Cost, etc. In the next part we will deal with the details regarding each column.
- You can also find numerous templates for fixed assets books online by simply searching for "fixed asset register template" in a search engine.
Part 2 of 2: Fill in the Depreciation Book
Step 1. Create a card for each asset
As we have already said, each asset must have its own card or section in which you will have to enter the information. If you opt for a flip binder, each page should target a single asset with related information. If you opt for a spreadsheet, an asset must be entered in each row. Regardless of which format you choose, the following information is required for each asset.
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Description:
the description serves to distinguish a particular asset from others similar. For example, a company that has several Ford trucks would have to differentiate them by color, model and year of registration (Ford 2012 F-250 brown). Note whether the item is New, Used, or Repaired. Also include its physical location.
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Serial number:
this is the identification assigned by the manufacturer. If your company has also assigned an identification number, write it down in your registration.
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Purchase date:
enter the date on which the asset was purchased.
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Original cost:
enter the price of the item purchased.
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Insurance coverage:
enter any details regarding the insurance policy, including the name of the company.
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Warranty Information:
if applicable, include contact details with the warranty provider.
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Date of commissioning of the asset:
note the first day of use of the asset.
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Estimated useful life:
here you should enter how long you expect the asset to last in terms of years or hours. This is also called the payback period, which will be covered in detail in the next step.
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Recovery Value:
enter the recovery value, which is the amount that the company expects to collect from the sale of an asset at the end of its useful life. In many cases this does not apply, as the asset is used until it is no longer resalable.
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Depreciation method:
Depreciation refers to the reduction in the value of assets over time and can take place through various methods.
Step 2. Select an appropriate depreciation method
The depreciation period is the period during which the value of the asset will decrease. To calculate depreciation, it is important to first know the reference time frame.
- A percentage of the asset's value is converted from asset to cost at the end of each accounting period during the depreciation period of the asset. The amount of the asset's value in each accounting year is determined by the depreciation method, which will be explained later.
- The depreciation period is based on the presumed useful life of the asset. Contact the manufacturer for further details on this.
- Often certain fixed assets are subject to depreciation rates set by the tax authorities.
Step 3. Find the most appropriate depreciation method
Since each asset depreciates over time, it is important to know what the most common depreciation methods are and to choose the one to use on the fixed assets register.
- Similar to the depreciation period, the allowed depreciation methods are often imposed by the tax authorities.
- Linear or straight-line depreciation is a very common method. With this method of calculating depreciation, the percentage of the fixed asset value remains constant in each period. For example, if an asset has a payback period of five years, then 20% of the asset's value will be converted into cost each year.
- Accelerated depreciation implements a breakdown of the original cost of an asset by attributing higher shares to the first years of the asset's useful life. This method implies that the greatest loss of value suffered by the asset occurs in a short time, rather than being distributed over several years; it follows that the tax charges are deferred to subsequent years. Note, however, that accelerated amortization also reduces equity more quickly. Consult an accountant to find out if this method is suitable for your business and if you can take advantage of some tax breaks.
- The depreciation method cannot be changed after the asset has been put into service and the depreciation method has already been applied.
- For further clarification, consult an accountant or professional in matters of bookkeeping.
Step 4. Conduct periodic checks to verify the accuracy of the depreciable asset register
Checks the accuracy of the information contained in the register annually, making a physical inventory check. As mentioned earlier, compare physical assets with those recorded in the asset book and make sure it is always up to date.
