Generally, fixed assets are the property with a useful life greater than one month, often more than one year. Fixed assets are not purchased for immediate resale or as materials for production , they are intended by the entity for usage in production or other business activities.
Here are some categories of fixed assets:

• Buildings
• Computer equipment
• Computer software
• Furniture and fixtures
• Machinery
• Vehicles

Also, you can use intangible assets. For available types of operations with fixed assets, see Overview of Fixed Asset Management.
Generally, fixed assets appear on the balance sheet in the Property, Plant, and Equipment (PP&E) section.

In this section

Overview of FA Management

Purchased fixed assets are stocked at warehouses, plant, or other appropriate locations. As the fixed asset is in use, its value will decline over time of its useful life. An asset's useful life is the duration when it is used for your business. Depreciation is the process of allocating an asset's cost over the course of its useful life. Generally, fixed assets are assets whose useful life exceeds one year. The examples of fixed assets are equipment, machines, buildings, land. Also there are intangible assets, such as trademarks, copyrights, or goodwill that add value to your organization. Fixed assets can be created within the organization or purchased.
Notice that generally tangible assets are depreciated except for land which is never depreciated. Some of the intangible assets are not depreciated because they may have unlimited useful life with their value not declining over time.
FirstBIT ERP provides the functionality that allows you to accept the assets to accounting, perform depreciation (decrease in cost), and then dispose of the assets.
To start depreciation calculation, you must create a fixed asset, match it to an inventory item (produced or purchased) and accept the item to accounting as a fixed asset.

Accepting to Accounting

To add a new fixed asset to accounting, go to: Accounting > Fixed Assets> Fixed Asset Entries.
In the process of creating a Fixed Asset Entry document, you match the inventory item to a fixed asset master record or multiple records which you create on the fly.
You can create one fixed asset for specific quantity of the inventory item or you can create a fixed asset for each unit of the specified quantity of the item.
For the item, you can manually enter the cost in the Amount field. Notice that if the item was purchased by using a foreign currency, conversion to the accounting currency is performed automatically using the actual exchange rates of both currencies with respect to the national currency.
Then the cost can be distributed between the assets manually as required or automatically evenly between the listed assets. Use the automatically calculated the weighted average cost by clicking the button to the right of the Amount field. The system will use the available for the item purchasing documents to evaluate the unit cost.
For a new fixed asset, you must specify the following:

• Initial Cost
• Whether the asset will be depreciated
• Which depreciation method will be used: Linear or Units of Production.

At any time, you can view the list of fixed assets and the accounting parameters by using the Fixed Assets master data.

Changing the Accounting Parameters for Fixed Assets

A fixed asset appears in the financial records at its net book value, which is its original cost, minus accumulated depreciation. The net book value of an asset is always declining. However, under international financial reporting standards you can revalue a fixed asset, so that its net book value increases.
If you need to change the parameters of depreciation for a particular fixed asset, you can create a new Changes to Fixed Asset Accounting Parameters document. You can change any or all of the following parameters:

• Initial Cost
• Whether the asset will be depreciated
• Depreciation method
• GL Accounts
• Business activity
• Expense Item

New accounting parameters will be applied starting the month of the document date.
Using the Depreciate check box, you can stop depreciation for some period of fixed asset conservation. The asset will appear on the balance sheet, however, the depreciation will not be calculated, and the net book value will not be changed during this period.

Using the Linear Depreciation method

The key difference between amortization and depreciation is that amortization charges off the cost of an intangible asset, while depreciation does so for a tangible asset.
Another difference between the two concepts is that amortization is almost always conducted on a straight-line basis, so that the same amount of amortization is charged to expense in every reporting period.
To use the Linear depreciation method, you must specify the initial cost of the fixed asset and enter the number of months of useful life (how many months it must be depreciated).
You can choose to start the depreciation in the month next to the month when the fixed asset was accepted to accounting – this is the default option. If you choose to start depreciation in the same month in which the asset was accepted to accounting, select the Depreciate in the Current Month option.
Then, during each month-end closing process, the depreciation expense which is equal to Initial Cost/ Useful Life (Months) will be posted. The depreciation calculation is not performed once the net book value becomes equal to 0.

Using the Units of Production Depreciation method

According to the Units of Production depreciation method, depreciation expenses are calculated proportionally to usage of the fixed asset which has a limited resource. Generally, this method is used when usage differs significantly from month to month.
For this depreciation method, you select the following parameters:

• UOM in which usage will be measured.
• Usage Limit which sets up the maximum usage recommended for the asset.

In a particular month, depreciation monthly expense is calculated as follows:
Month Usage * (Initial Cost/Usage Limit)
The net book value is calculated as follows:
Net Book Value = Initial Cost - Accumulated Depreciation
You can use the Fixed Assets Output report to view the fixed asset usage.
The depreciation expense and accumulated depreciation amounts will be calculated during the Month-End Closing process. The depreciation calculation is not performed once the net book value becomes equal to 0.

Selling the Fixed Assets

After some period of fixed asset usage, the organization may decide to sell the asset. The sales may require the recording of a gain or loss on the transaction in the reporting period when the sales occurs.
Sales of fixed assets are registered by creating the following documents: Accounting > Fixed Assets > Fixed Asset Sales.
At the period of sales the asset's net book value is the difference between the initial cost and the accumulated depreciation.
Note. If the sale occurs before the end of the month date, you can manually run the depreciation calculation for the current month by clicking the Calculate Depreciation button on the toolbar of the Fixed Asset Sales (create) form.
Any difference between the proceeds from sales and the fixes asset's residual value is recognized as either a gain or a loss.
Sale transaction debits the cash account (or Receivables) for the amount received, debits the Accumulated Depreciation account, credits the Fixed Asset account and debits/credits the Fixes Asset Sales account.
Example
The organization purchased a machine with useful life of 5 years for $4000 on June 1, 2015. The machine was depreciated by using the linear depreciation method, each year by $800. Then, the organization decided to sell the asset on June 2018 for $3000 in order to raise cash for the purchase of a new machine. At the moment of sale, the net book value of the machine is 1600.
The sale transaction generates the following journal entries:

Writing off the Fixed Assets

A fixed asset is written off when it is determined that there is no further use for the fully depreciated asset, or if the asset is disposed of without receiving any payment in return or damaged before it was fully depreciated. A writeoff involves removing the fixed asset from the balance sheet, that is, from GL accounts.
Writeoffs of fixed assets are registered by creating the following documents: Accounting > Fixed Assets > Fixed Asset Write Offs.
A fixed asset writeoff involves reversing of both the recorded cost of the fixed asset and the corresponding amount of accumulated depreciation. Any remaining difference between the two is recognized as either a gain or a loss. Proper fixed asset writeoffs ensure that the balance sheet correctly reflects the assets actually owned by the entity.
Here are the options for accounting for the disposal of assets:
If the asset is fully depreciated, writeoff debits all accumulated depreciation and credits the fixed asset GL Accounts.
Example
The organization purchased a woodworking machine with useful life of 4 years for $2000 on June 1, 2015. The machine was depreciated by using the linear depreciation method during 3 years and 6 months. Then, the machine was damaged beyond repair. The organization wrote off the machine. At the moment of writeoff, the net book value of the machine was 1750.
The writeoff document generates the following journal entries:

Viewing the Fixed Assets Documents

To find all the documents related to a particular fixed asset, go to: Accounting > Fixed Assets > Fixed Asset Documents. Using this form, you can filter all the fixed asset documents by document type, particular fixed asset or both. Also, you can search the document by inventory number or a string in the fixed asset description.

Reporting Fixed Assets on Financial Statements

Your organization must show both tangible and intangible assets on your balance sheet, with tangible assets listed first. For details, refer to[ Financial Statements|ed6799d9-bbad-44dc-8a8e-47a7ae82d7c0].
For managing fixed assets, you can use the following reports in the Accounting module:

• Inventory Card: Using this report, you can view the net book values of fixed assets with some details of depreciation. You can filter the data by entity, status, department, specific fixed assets.
• Fixed Assets Output: The report lists the fixed assets with the Units of Production depreciation method. For each such fixed asset, the output in the specified units of production during the selected period is shown.
• Statement of Depreciation: The report lists the fixed assets grouped by department with the details of depreciation. You can filter the data by entity, department, and specific fixed assets.

For more information on details, refer to Accounting Reports.