A fixed asset register is a record of all assets held by a business that is intended to be used for commercial purposes and not to be sold for profit. Such a record is required for tax purposes. Fixed asset register (FAR) maintenance includes the collection of detailed information about all fixed assets held by the company. Examples include machinery and equipment used to manufacture products and land and premises in which business is conducted.
Fixed assets are goods acquired by the company and used directly for it, either for its production or for its operation and therefore fixed asset register (FAR) maintenance holds an important place in the smooth functioning of a company.
Fixed assets are entered on the assets side of the balance sheet and are depreciated. They can be:
- Tangible (buildings),
- Intangible (goodwill, etc.),
- Financial (guarantees given).
Throughout its existence, a company must acquire various goods that allow it to conduct business. These items are the property of the business and separate from the goods and services that the company sells to its customers.
These items, also known as property, plant, and equipment, must be monitored continuously, not only to comply with tax laws but also so that the company can know the costs associated with all its assets. As this is the case, a thorough inventory of fixed assets is critical to the operation of any business.
The fixed assets register is complex because it involves tracking the accumulated depreciation, it is a dynamic register, which is updated every month, according to the registered depreciation.
The most obvious component of any register of fixed assets is a detailed listing of all items that qualify as fixed assets. These assets cannot be easily sold for cash and are not intended for this purpose. For example, a piece of equipment used in the manufacture of a specific product would be a specific example of a fixed asset. Fixed assets can also include fewer specific items, such as copyrights or patents because these items have a value of their own.
Valuation of assets held by the company is also a necessary part of the register of fixed assets. This is necessary for tax purposes and can also be helpful for the company in terms of understanding what type of insurance is needed to protect property, plant, and equipment.
An entity evaluating the property, plant, and equipment it owns must also account for depreciation. Depreciation is the value that an asset loses during its use, and companies are allowed to write off the loss of this value on their tax returns.
An effective inventory of property, plant and equipment will include as much detailed asset information as possible. This should include information about where the items are located, where they were purchased, and when the items need to be serviced. Serial numbers and barcodes make it easy to trace all items to their sources, and for this reason, they are usually included in registers.
How to Consider the Purchase of Fixed Assets?
You must register a fixed asset on the asset side of the balance sheet. Every year, a part of the number of fixed assets is needed to be deducted from the income statement, in the form of depreciation to take account of the wear and/or aging of the asset.
Each fixed asset is entered in the fixed assets register, with its acquisition date, its original value, and its description. Then every year, the depreciation for the year, then the cumulative depreciation since the asset was purchased. Finally, the netbook value considers the purchase price and the depreciation carried out corresponding to this asset, to indicate the final value of the asset.