Fixed Asset for Accounting

Computer laptop fixed asset

The definition of Fixed Asset (FA) is an asset which the business owns and will have a remaining life for over one year. They appear on the accounts as part of the balance sheet.

If your business is a limited company, you are required by law to keep a record of all your equipment in a fixed asset register. It can either be a simple spreadsheet, a list in a notebook or if you have lots, you may need to use a software package.

Our free Excel Depreciation Schedule is a fixed asset register that also calculates the depreciation for you. We also have a quick depreciation calculator, which will calculate the depreciation using the straight-line depreciation or reducing balance over a given period.

What are fixed assets?

There are two types of assets:

Tangible Assets

These are the most common asset that a business may own and include the following: Cars, machinery, computers (including laptops), buildings, furniture, and fittings. Tangible assets are shown in the balance sheet of the business at cost price, and then depreciation is calculated to reduce the balance. To find out more about depreciation and how to calculate depreciation take a look at our depreciation accounting section.

Intangible Assets

Intangible assets do not have to be a physical item but include things like goodwill, brands, patents, trademarks, and licences. They can be challenging to put a value on, but these sorts of assets can account for a large proportion of the business’s assets, especially if it is a large organisation with a very well known brand.

Investments

These will only be included in the accounts if the business has invested in something like a long term investment and may consist of a joint venture or purchasing a stake in a different company.


Fixed Asset Accounting

Asset Accounting can be complicated; it may be worth speaking to your accountant to find the best way for your business to calculate the costs.

If you have a fixed asset that has been sold or withdrawn from use, you will need to calculate the disposal of fixed assets figure and post it to the accounts.

Tangible Assets are usually calculated by taking the purchase value of the item and reducing it by depreciation over some time. An example of this is that a small business purchases a computer for 600. They depreciate the computer over three years, and therefore the depreciation will be 200 per year.

Download our free depreciation schedule Microsoft Excel template for your fixed asset schedule.

Intangible Assets are harder to value as they have no fixed costs.

Fixed Asset Software

There are several choices for Asset software packages. If you already have an accounting package, check to see if it includes Fixed Assets. Most of the paid software packages have it included. Xero allows you to set up a fixed asset register and calculate the depreciation.

If you are a larger company and need to track and value FA’s there are some software packages available.

Fixed Asset tracking

There are several ways to complete fixed asset tracking. As a one-man band, you will know where the equipment is. If you have a couple of employees, it may be worth giving each piece of equipment a sticker with a unique number.

A larger company may have a lot of assets making it worth investing in fixed asset tags or labels. Some of these will include a barcode which can be read with a barcode reader, and the equipment will then be identified.

We have written a short guide on barcode asset tracking; this explains how barcodes and scanners can work with all your assets.

Return from fixed asset to bookkeeping basics page.