Accounting of Fixed Assets
The Commission’s asset policy specifies the method for the consistent accounting of fixed assets and serves as a reference for all inquiries regarding the disposal of Commission-owned assets. As a government agency, the Commission is responsible for the safekeeping, maintenance, and use of all assets, including fixed assets purchased, in-kind donated, or acquired for the purpose of acquiring them. As a result, the Commission must make journal entries to record all transactions relating to its fixed assets, and reconcile them every spring.
Another method of accounting for fixed assets is to use the fair market value (FMV) of the assets acquired in exchange for securities. When a company sells its fixed assets, it records the sale price at the FMV of the assets given up in exchange for the assets it has acquired. The option of recording the asset at its net book value is closed. Fair market value is the price agreed upon by knowledgeable parties in the open market for the asset.
As a business owner, you must keep track of the growth of your inventory, sales, and services, as well as the production process. Over time, your business may need to implement new software, and update your inventory control method. If you do this, you’ll have to account for a new asset type in your business’s accounting records. In other words, revaluing fixed assets is an ongoing process, which you need to do regularly to ensure maximum earnings from your business.
In other words, fixed assets are long-term, tangible assets that generate income and financial gain for the company. For a business to be profitable, it must produce financial or non-tangible income. If it does, it should be capitalized and recorded as an expense in the Fixed Asset module. But what if you can’t afford to make these investments? The accounting of fixed assets is a complex process and requires a thorough understanding of the rules for reporting and analyzing them.
There are two basic types of assets: tangible and intangible. Tangible assets have a physical existence, such as property, and intangible assets don’t. Intangible assets, on the other hand, are intangible, such as brand recognition, intellectual property, goodwill, and patents. A company may own only one of these, depending on the needs of the business. A business should be aware of these differences when evaluating the value of its fixed assets.
The primary method for recording fixed assets is by recording their cost. This is different from their replacement cost, which takes into account current prices. This figure is obtained from periodic revaluations of fixed assets for the economy as a whole. The latest revaluation was based on prices prevailing on Jan. 1, 1972. A company should record the results of such revaluations in their charter-fund account. Once this information is gathered, it is important to document the method used for determining fixed asset values.
Another important method for determining the value of fixed assets is through amortization. The life of a fixed asset can be a few years, but for most businesses, amortization is the most common method. Depreciation is measured monthly, but there are some exceptions. Land and cultural property are generally exempt from depreciation. If you have a good idea of the value of an asset, it will be reflected in the balance sheet.