What is a Fixed Assets Register?
Fixed assets register is a catalogue of a business’s fixed assets, carrying details like their purchase price, depreciation values and current location to accurately document the course of their useful life. It helps a business maximize the utility of its fixed assets such as machinery, building, vehicle and the like.
- Fixed assets register keeps a detailed record of the fixed assets of an organization. It helps maximize the utility of an asset, avoid duplicate purchase, ensure legal compliance and manage auditing requirements.
- Depending on your business’s needs, the register can be maintained using complex software products or a simple spreadsheet.
- There is no universal template for this register, but it usually contains categories like purchase date and cost, depreciation method, rate, lifespan, and maintenance cost.
Understanding Fixed Assets Registers
A business owner deals with different types of assets such as machinery, vehicle, current stock, cash, etc., to produce goods and services. Any piece of equipment or property that a company owns and uses over a long period of time to generate income or keep itself operational is known as a fixed assetFixed AssetFixed assets are assets that are held for the long term and are not expected to be converted into cash in a short period of time. Plant and machinery, land and buildings, furniture, computers, copyright, and vehicles are all examples..
A lot of details accompany a fixed asset throughout its useful lifeUseful LifeUseful life is the estimated time period for which the asset is expected to be functional and can be put to use for the company’s core operations. It serves as an important input for calculating depreciation for assets which affects the profitability and carrying value of the assets. which could be its purchase price and date, location of existence, depreciation rate, yearly depreciation value, maintenance cost, servicing date, insurance details, and salvage value, among others.
If a business fails to keep track of such information, it may lead to losses. For instance, there is a pizza delivery company that delivers food to its customers using vehicles. In the middle of a busy day, five of its vehicles break down. A close examination found that they have been rendered obsolete as they were not taken for timely servicing in the last two years. An absence of ready-made data like an approaching servicing date led to their overuse and a subsequent loss for the firm.
As such, you must maintain a fixed assets register, regardless of the size of your business. It helps enhance efficiency, maximize the utility of an asset, avoid duplicate purchase and attain hassle-free auditing.
Whether or not an item is included in the register will depend on what it is used for. For instance, a delivery truck would be considered a fixed asset for a courier company, but it would be an inventory item for a truck manufacturing business. This is because the courier company will use the truck for operational purposes, while the truck manufacturer will sell it for a profit.
However, some typical assets included in the register are –
- Building, land and property owned by the business, such as factories, office buildings, retail outlets, and warehouses.
- Office tools and equipment like telephones, photocopiers printers and computers.
- Air-conditioning, furniture, water coolers, etc.
- Cars, trucks, vans, and other vehicles used for operational purposes.
Benefits of Fixed Assets Register
There are numerous ways in which your business will benefit from having an accurate and up-to-date fixed assets register. Some of these ways are as follows:
Provides Comprehensive Data
By maintaining a register, you will have all the relevant details about the location, usage, life cycle, and maintenance costs of each company asset at your disposal. This information will help you make informed decisions about efficiently utilizing all your company’s fixed assets and when to dispose of them.
Enhances Asset Security
It will provide a business with all the required information about the location, operational status, and expected lifecycle of any given asset owned by it. This will ensure the security of these assets and prevent theft or misplacement, as you will always know where each asset is located and whether or not it is still functional.
Evaluates Maintenance Costs
With a well-maintained register, you will always know when a particular piece of equipment was purchased. You will also learn how long it has been in use, how well it is performing, and when its expected life-cycle will end. This will help you accurately predict future maintenance costs for the tools and machines used in the functioning of your business. It will also assist in creating a budget for these expenses in advance. Also, for future purchases, this will help in decision making as the assets with a high maintenance cost can be avoided.
Keeps Track of Depreciation
The register will help you calculate the real value of all your company’s property and equipment. This is facilitated by keeping track of details such as purchase date, purchase cost, depreciation ratesDepreciation RatesThe depreciation rate is the percent rate at which an asset depreciates during its estimated useful life. It can also be defined as the percentage of a company's long-term investment in an asset that the firm claims as a tax-deductible expense throughout the asset's useful life., and salvage value. It will ensure that the values on the life span of an asset remain correct. It also gives enough time for an organization to arrange for replacement without affecting the flow of operations.
Facilitates Legal Compliance
It provides precise information about the cost, depreciationDepreciationDepreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Its value indicates how much of an asset’s worth has been utilized. Depreciation enables companies to generate revenue from their assets while only charging a fraction of the cost of the asset in use each year. , and the current value of each asset. Having such information in place, help a business comply with your country’s statutory regulations. This, in turn, will enable the business to avoid the fines and penalties associated with compliance violations.
Accelerates the Audit Process
When auditors inspect the account books of your business, having an accurate and up-to-date fixed assets register will make the audit and verification process simpler. In Wilson County, Tennessee, it was recently reported that the state comptroller’s audit found significant accounting errors. The amount added up to about $14 million.
Many issues in the calculation of accumulated depreciationAccumulated DepreciationThe accumulated depreciation of an asset is the amount of cumulative depreciation charged on the asset from its purchase date until the reporting date. It is a contra-account, the difference between the asset's purchase price and its carrying value on the balance sheet. led to these problems. Some assets were depreciated on the inaccurate acquisition date, others were not depreciated, and a few were depreciated in excess.
How to Prepare a Fixed Assets Register?
The format of fixed assets register varies depending on your needs. A few decades earlier, businesses used to maintain manual, paper-based records of all their fixed assets. These records were updated from time to time by a bookkeeper. Nowadays, many such registers are electronic. There are many software applications to help with the management of fixed assets. Some popular names are Upkeep, AssetCloud, etc.
Depending on your business’s size and nature, you can choose to maintain your register on an excel spreadsheet or a specialized fixed asset management software. The method that enhances the efficiency and cost-effectiveness of your business is the one that you should opt for.
Format of a Fixed Assets Register
There is no universal template or format for how a register should be maintained. The extent of details included about each asset will depend primarily on your country’s laws and the requirements of your management team.
For small businesses, the register could be a single Excel spreadsheet. Large, multinational companiesMultinational CompaniesA multinational company (MNC) is defined as a business entity that operates in its country of origin and also has a branch abroad. The headquarter usually remains in one country, controlling and coordinating all the international branches. could use numerous complex software products to keep track of all their assets across diverse geographies. A sample format looks something like the picture below.
Kindly note that the template above is an example of fixed assets registers, and must not be considered binding. The format varies as per organizational needs.
There are, however, certain categories that are found in most registers. This is because these categories have proven useful in keeping track of assets and calculating their value over time. They are listed below.
- Serial numbers to help you keep count of the entries.
- A unique identification code to help find each asset quickly when required.
- A description of the asset can be as brief or detailed as you need it to be.
- Purchase date (or invoice date) of the asset, to determine the remaining lifespan and the extent of depreciation.
- The cost of purchase will include any associated installation or construction costs. It helps calculate any subsidies or tax benefitsTax BenefitsTax benefits refer to the credit that a business receives on its tax liability for complying with a norm proposed by the government. The advantage is either credited back to the company after paying its regular taxation amount or deducted when paying the tax liability in the first place. you can avail while making its purchase.
- Depreciation rate and method to help auditors understand which method of depreciation was used for financial reportingFinancial ReportingFinancial Reporting is the process of disclosing all the relevant financial information of a business for a particular accounting period. These reports are used by the stakeholders (investors, creditors/ bankers, public, regulatory agencies, and government) to make investing and other relevant decisions. . It also brings to light how much depreciation has occurred over the period of asset ownership.
- Gross and net book valueNet Book ValueNet book value refers to the carrying value of the corporate assets acquired after accounting for depreciation, as reported in the company's balance sheet. An asset's net book value is calculated as "Net Book Value = Original Purchase Cost – Accumulated Depreciation"., which are, respectively, the value of the asset before and after applying depreciation.
This has been a guide to what is a Fixed Assets Register and its definition. Here we discuss how to prepare this register along with benefits and its format. You may learn more about financing from the following articles –