Introduction To Fixed Assets

Your business possesses fixed assets. Although a general term, "Fixed Assets" is a label that can be applied to assets of a relatively fixed or permanent nature owned by your business, Fixed Assets must be tangible in nature and used in the operation of your business, that is, not held for sale. The items most frequently included as fixed assets are: equipment, furniture, tools, machinery (including office machines such as typewriters, copiers, computers, etc.), buildings, and land. Although there is no one standard criteria as to the minimum length of life necessary for classification as a fixed asset, it should be capable of repeated use and is ordinarily expected to last more than one year. However, Fixed Assets need not be in continuous or even frequent use. Standby equipment, for use in the event of a breakdown of regular equipment or during peak periods, are still considered Fixed Assets.

Assets acquired for the purpose of resale in the normal course of business (undeveloped land, other real estate held as speculation, or equipment removed from service and held for sale) are not considered fixed assets.

Determining Original Cost

The original cost of any fixed asset should include all costs necessary to get the asset in place and ready for use. Costs such as sales taxes, shipping charges, installation, improvements, and repairs should be added to the purchase price to arrive at the Original Cost of the Fixed Asset.

Depreciation

With the passage of time, all fixed assets, with the possible exception of real estate, lose their capacity to yield service to your company. As a result, their costs should be transferred in a systematic manner to related expense accounts over their useful lifetime. This periodic cost transfer is called Depreciation. This Profi'C Fixed Assets module is designed to record and process the details of your fixed assets, your depreciation methods and schedules, and your General Ledger Interface information.

Before Starting To Build Your Fixed Assets

There are other modules in which you need to perform maintenance before you can successfully begin to build your Fixed Asset Master Files.

1. Establish General Ledger Chart of Account Listing in the General Ledger module for:
   • Each Asset Description (e.g. Buildings & Improvements or Equipment)
   • A Depreciation Account
2. Establish a Product Number in the Inventory Control module for each asset.