ixed Fixed assets can be created within the organization or purchased. The examples of fixed assets are equipment, furniture and fixtures, machinairy, or buildings. Also there are intangible assets, such as trademarks, copyrights, or goodwill that add value to your organization. An asset's useful life is the duration when it is used machinery for your business. Generally, fixed assets are assets whose useful life exceeds one year.
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Planning for new assets is the first stage of their life cycle. Asset managers need to identify particular business needs, budget restrictions, and perform market research. At this stage, it can be decided whether it is worth constructing or manufacturing the asset by the entity's own means.
Acquiring Stage
You can acquire a new fixed asset by purchasing or constructing.
At this stage, you can create a master record for the fixed asset, for this go to: Asset Management > Master Data > Fixed Assets. Specify a unique identifier/ code, fixed asset type, and class of the asset. For more information, refer to Adding a Fixed Asset.
By default, the fixed asset gets the New status.
If you purchased fixed assets, you can register it as the purchase of new inventory items by creating an Invoice Received. You may need to create corresponding master records for these inventory items.
Deployment of some assets may involve assembling and training of the personnel. These costs can be recorded using the Purchasing > Purchase Documents > Additional Costs documents.
If it is planned that the asset will be constructed, you can manually change the New status of the fixed asset to Construction in Progress. Costs of any materials and construction works must be recorded to Construction in Progress GL account. Once the fixed asset is ready to use, you can manually change the status to Construction is Completed.
Usage Stage
Once the fixed asset is ready for use, and have the Construction is Completed or New status, you can accept it for accounting and start depreciation.
To add a new fixed asset to accounting, go to: Asset Management > Fixed Asset Documents > Fixed Asset Entries. In this document, for the specified fixed asset, you can list the inventory items that will be used as the fixed asset or specify only the construction costs if the fixed asset was constructed.
A fixed asset may be composed of multiple inventory items. You can create one fixed asset for specific quantity of the inventory item or you can create a separate fixed asset for each unit of the specified quantity of the item. For example, a fixed asset Conference Room Chairs may include multiple chairs used in a conference room. Alternatively, you can consider each chair as a separate fixed asset. Also, you can associate multiple items of different types with a single fixed asset. For example, a warehouse fixture may include multiple racks and shelves purchased separately.
Note. Accounting for the fixed assets is performed in the accounting currency.
For the fixed asset, you need to specify the following parameters:
- Initial Cost: the total of all costs and additional expenses incurred when purchasing the items, transporting it to the premises, assembling, and adjusting.
- Salvage Value: the residual cost of the asset after usage.
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During usage, the fixed asset cost is depreciated according to the selected for this asset depreciation methos methods and parameters. For more information, refer to Overview of Depreciation of Fixed Assets.
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A fixed asset is written off when it is fully depreciated, becomes obsolete and is of no use, significantly damaged, or by other reasons. Either way, the fixed asset is written off the balance sheet as it is no longer in use by the organization.
Writeoffs Write offs of fixed assets are registered by creating the following documents: Asset Management > Fixed Asset Documents > Fixed Asset Write Offs.
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