Tracking Fixed Assets

What are Fixed Assets

Fixed assets are assets that you use in your business to run the business. For example computers are fixed assets, so are any machines that you use in production or any buildings that you own. Smaller products can also be fixed assets, such as desks or office chairs. Whether or not it is a fixed asset is determined by the nature and price of the product.

1. A fixed asset has to have a life-cycle exceeding one year.
2. A fixed asset has to exceed a certain price. In South Africa any product that costs more than R2000 (amount may change, please consult the current value for the tax authorities) is classified as a fixed asset.(excluding goods that you trade).

If the product costs more than R7000 , but has a life-cycle of less than one year, you can consider it as an expense and do not need to enter it as a fixed asset. The reason for this is that such a fixed asset would have to be depreciated to zero within the first year (i.e. which is equal to entering it as an expense anyway).

To read more about fixed assets and fixed asset deprecation you can click this link to go to Wikipedia, which gives an easy-to-understand introduction to fixed assets.

Since Fixed Assets have a life-cycle, you undertake a few different tasks relating to the fixed asset.

Buying the Fixed Asset

When you buy the asset, you have to do two things:

1. Create a fixed asset account and link it to a fixed asset register.
2. Enter the supplier invoice for the fixed asset

Click here for more details about what to do with a new fixed asset.

Fixed Asset Depreciation

During the life-cycle the fixed asset is depreciated to account for wear and tear, through regular depreciations.

Click here for more details about depreciations.

Fixed Asset Disposal

When a fixed asset is of no more value to your company, the asset needs to be disposed of. When you dispose of an asset, it is written down to a balance of zero.

Click here for more details about write-downs and fixed asset disposals.