Fixed Asset Accounting

Fixed Asset Accounting

This is a guide to fixed asset accounting for further advice you should speak to your accountant.

Fixed Assets are recorded as an asset on part of your balance sheet. When you purchase a fixed asset you will need to reduce your bank balance and increase your fixed asset balance.

You will also need to add a record of the asset in your fixed asset register. This keeps a detailed record of all your fixed assets.

Fixed assets need to be written off or depreciated over a period of time. There are several different methods for depreciation; the most widely used is the straight line method which reduces the asset value equally on a month by month basis.

Fixed asset example

A business purchases a computer in September for £360 and it has a useful life of 3 years. The accounting year end is March.

Balance SheetDebitCredit
Computer Equipment£360.00

Accounting for depreciation

Accounting for the depreciation will need to be done as follows; this is using the straight-line method.

The computer has a useful life of 3 years or 36 months. The cost of the computer will need to be divided by the months that the equipment is owned during the accounting year. For this example, the depreciation is £10 per month or £120 per year.

Year one

Equipment is owned for 7 months, depreciation £10 per month. Depreciation for the year is, therefore, £70 and will be shown in the accounts as follows:

Balance Sheet
Fixed AssetDepreciationNet book value

Depreciation is also shown as a cost in the Profit and loss account.

Return from fixed asset accounting to fixed asset page.