Fixed-Asset Accounting Basics (2024)

What Is a Fixed Asset?

A fixed asset is a tangible piece of property, plant or equipment (PP&E); afixed asset is also known as a non-current asset. An asset is fixedbecause it is an item that a business will not consume, sell or convert to cash withinan accounting calendar year.

The term fixed, however, does not refer to the physicality of an asset. Somecompanies move fixed assets regularly for business purposes. Recording fixed-assettransactions helps create valuations and aids in financial reporting, which can be crucialto capital-intensive projects. Most businesses own at least some fixed assets.

What Is an Asset?

An asset is any resource that you own or manage with the expectation that it willyield continuing benefits or cash flows. An asset is also a resource the value of which youcan dependably measure. Individuals, companies and governments can hold assets. Entitiesrecord their purchase of a fixed asset on the balance sheet, Asset purchases used to benoted on a sources and uses of funds statement, which is now called a cash flow statement.

Fixed assets differ from inventory in that inventory exists for the purpose ofconsumption. Inventory includes items such as raw materials and supplies for manufacturing,finished goods for sale and supplies for maintenance, repair and operations.

List of Fixed Assets in Accounting

In accounting records, each fixed asset receives anaccount. The following list includes examples of fixed assets.

Examples of Fixed Assets

• Buildings and Facilities:
  Fixed assets include existing buildingsand facilities that are under construction. Anything under construction exists in anaccumulation account (for example, Construction-in-Process) until the work is complete.Upon completion, an accountant will move the asset to the appropriate fixed-assetaccount.
• Computer Equipment:
  These assets include servers, laptops,desktops, iPads and so on.
• Computer Software:
  Software fixed assets focus on enterprisepackages and platforms. Cloud-based applications are treated like software fixed assetsfor internal use, described later in this article.
• Furniture, Fixtures and Fittings:
  Furniture includes officeequipment, desks, cupboards and conference tables. Fixtures include built-in items thatyou can’t easily remove, such as fireplaces. Fittings (known as chattels in the UKandmovables in Scotland) include removable items such as mirrors, lights and art.

Land

• Leasehold Improvements:
  These fixed assets are any additions andupgrades you make to leased assets or rental property. Such assets include built-incabinets, interior walls, ceilings and any electrical and plumbing upgrades.

Heavy Machinery and Equipment

• Tools:
  Tools used in the business may be fixed assets depending ontheir financial basis and the value threshold of the company. For example, you wouldexpense a $12 hammer, but a $1,500 insulated tool set or high-end drill bit set may be afixed asset.
• Vehicles:
  These assets include cars, trucks, forklifts and more.

Video: What Are Fixed Assets?

Classification of Fixed Assets in Accounting

Companies classify their assets into recognizable types, which are essential to understandingthe net working capital and solvency of an organization. Accountants categorize assets usingthe following guidelines:

• Properties:
  Assets are a resource and represent ownership andeconomic value. An owner can exchange an asset for its commercial value or use it as aresource to create more wealth or benefits.
• Classifications:
  You can also distinguish assets by theirphysicality (physical existence), convertibility (level of ease with which you canconvert them to cash) and their business usage.

What’s the Difference Between Total Assets and Net Assets?

Net worth or net assets describe the value of an entity. The calculationfor net assets is assets minus liabilities. Determine total assets by adding totalliabilities to owner’s equity.

Net Assets Formula

Net Assets = Total Assets– Total Liabilities

Total Assets Formula

Total Assets = TotalLiabilities + Owner’s Equity

Determining Service Life of an Asset

For accounting purposes, an asset’s service life may not match its item life. Theservicelife of an asset is an accounting and management estimate of the useful life of an object.Base the service life estimate on the following:

• General knowledge of how long similar items last
• Whether the asset is new or used
• Whether you use the asset frequently or seldom
• History of obsolescence for such items
• Service patterns for an industry or an individual business

Some assets return value after their service life, such as with car trade-ins, while somecompanies use other assets until they are worthless.

What Is Fixed-Asset Accounting?

Fixed-asset accounting records all financial activities related to fixed assets. Thepractice details the lifecycle of an asset, such as purchase, depreciation, audits,revaluation, impairment and disposal. In a company’s books, each asset has an account,whereall the financial activities related to fixed asset are recorded.

“Fixed-asset accounting is about understanding how to properly accountfor theinvestments you make as a business and about understanding what would count as a capitalizedcost,”

explains Riley Adams, a licensed CPA in the state of Louisiana working as a senior financialanalyst for Google in the San Francisco Bay Area. He writes the personal finance blog Young and the Invested,which is dedicated to helping young professionals find financial independence and exploreentrepreneurship.

“The capitalized cost of an asset is depreciated over time with its use.Fixed-asset accounting is about distinguishing between what costs can be capitalized andwhat should be immediately expensed in the year the asset goes into service,” Adamsadds.

Accounting regulations and standards are followed to ensure the uniformity of anorganization’s financial statements. These procedures include documenting financialrecords,calculating revenue, estimating fixed-asset valuations and complying with tax laws.Generally Accepted Accounting Procedures (GAAP) form the standard used by the United StatesSecurities and Exchange Commission (SEC). The International Financial Reporting Standards(IFRS), headquartered in London, with the International Accounting Standards Board (IASB) asits standards-forming board, provides common accounting practices for businesses worldwide.

“Most businesses in the U.S. use GAAP. Public companies that filequarterly andannual reports to the SEC must present their financial statements in accordance withGAAP,”Adams says.

The Fixed-Asset Accounting Cycle

Each fixed asset has a lifecycle that includes at least three of these stages: purchase,depreciation, revaluation, impairment and disposal.

The Fixed-Asset Lifecycle

These journal entries (see examples below) cover the transactions associated with thefixed-asset lifecycle:

• Acquisition:
  Enter the total purchase cost, including any costs toship, install or costs that ensure the safe and serviceable function of an asset. Thejournal entry documents whether you purchase the asset outright, through installments orvia an exchange.
• Depreciation:
  In this entry, you record periodic depreciation or adecline in net book value for tangible assets and amortization for intangible assets.
• Revaluation:
  These types of entries reflect the current fair marketvalue of a fixed asset. You’ll need to make a series of accounting changes todetermineif there is a gain or loss from revaluation.
• Impairment:
  Also called writing down, represents the periodduring which the market value of an asset is less than the valuation entered on anorganization’s balance sheet.
• Disposition:
  At the end of an asset’s useful life, a companymaydispose of an asset by selling, trading or scrapping it. In this phase, you eliminatethe assets from the accounting records. You may end up recording a gain or loss on theasset disposal transaction during that financial period.

Acquisition: Accounting for Purchase of Fixed Assets

To record the purchase of a fixed asset, debit the asset account for the purchase price, andcredit the cash account for the same amount. For example, a temporary staffing agencypurchased $3,000 worth of furniture. When the furniture arrives, the accountant debits thefixed assets account and credits the cash account to pay for the furniture.

For assets bought on installments, include the interest rate. Gauge assets exchanged forother assets at fair market value. If you can’t measure the value of an exchangedasset,carry over the value of the original asset.

For practical purposes, you may treat individual items in an asset category as one asset.Examples include office chairs or laptops. To be considered one fixed asset, items mustshare an asset group, acquisition date and an acquisition cost.

Asset Splits

You can split one fixed asset into multiple assets. Over time, you may separately transfer ordispose of each item. Then, split the asset on the books and record it as an asset split.Splitting creates a new asset but retains the ID of the original asset.

You can split assets by quantity or by book value. Suppose you buy four tablets for a totalof $2,000. If their useful life is three years, using straight-line depreciation, themonthly depreciation for the complete asset is $55.55. Six months later, someone drops atablet on the concrete stairwell and the company must dispose of it. The accumulateddepreciation for the whole is $333.33 and the net value is $1666.67. From this transaction,split the asset into two.

Now you have two assets: the original with three tablets and a second asset with one tablet.Since this breakage reduced the original quantity from four items to three, the ratio is75% (3/4 *100).

Multiply the original cost by the ratio

$2,000 * 75% = $1,500

then by the number of months the equipment is meant to be in service

$1,500 / 36 Months = $41.67 depreciation per month

Then multiply the depreciation per month by the number of months gone by for the accumulateddepreciation

$41.67 * 6 = $250

Subtract this accumulated depreciation from the original cost for the net value

$1,500 - $250 = $1,250

When you split the asset, the original asset retains its ID.

The new asset is unique, gets a new ID and represents 25% of the original asset. The asset isone unit and gains the accumulated depreciation of $83.33, and the net value is $416.67.

Non-Monetary Transfer of a Fixed Asset

Non-monetary transactions usually involve real estate swaps or asset transfers, as whensomeone donates an asset to a nonprofit. Suppose a consulting firm is moving to a new officeand decides to donate its old desks to a charity. The original cost was $25,000. Theaccumulated depreciation is $15,000. The book value, therefore, is $10,000. The fair marketvalue is calculated at $17,000.

The journal entry for the books looks like this:

Accounting for Depreciation of Fixed Assets

Enter depreciation on the books for the total sum of assets or by asset type. The amount ofaccumulated depreciation plays a role in calculating any loss or gain at the disposal of theasset.

There are four types of depreciation:

• Straight Line:
  This option spreads the depreciation evenly over theuseful life of an asset.
• Accelerated or Sum of Remaining Years:
  This method writes off moreof the cost in the early years and less in the later years.
• Units of Production:
  Depreciation by units of production writesoff an asset according to how much that asset produces.
• Double Declining Balance:
  This method accounts for the expense ofa longer-lived asset that quickly loses its value or becomes obsolete. Examples ofassets that should use the double declining methods are computer equipment, expensivecell phones and other technology that has more value at the beginning of its life thanat the end.

Journal Entries for Fixed-Asset Depreciation

Depreciation is a significant cost-saving function. Depreciation provides anapproximate current value and allows you to spread the cost of an asset over its useful life

Salvage Value in Depreciation Calculations

When an organization anticipates that it can sell an asset or that an asset will otherwiseprovide value at disposal, that amount represents the salvage value. You deduct the salvagevalue from the initial cost to determine the amount that will be depreciated through theservice life of the asset.

Here is the formula to calculate salvage value:

Cost – Expected SalesValue= Salvage Value

Value estimates may not be consistent, and they can and should be adjusted throughout thelife of an asset.

If a company buys an asset for $5000 and expects to sell it for $1000 in three years, it canthen depreciate $4000. At the end of three years, the company expects to sell the asset for$1000.

5,000 - 1,000 = 4,000

Below are the formulas for each type of depreciation.

Straight-Line Depreciation

To record straight-line depreciation, debit the asset depreciation expense account and creditthe accumulated depreciation account. Here is the formula:

Depreciation Expense =(Cost – Salvage Value) / Useful Life

For example, a company determines that its monthly depreciation expense is $18,500. It entersthe information as shown below.

Accelerated or Sum of Remaining Years Depreciation

This method of calculating depreciation assumes that the asset productivity decreases overtime. Here is the formula:

Depreciation Expense=
(Remaining Life / Sum of theYears’ Digits) * (Cost – Salvage Value)

For example, a manufacturing company purchases a machine on Dec. 1, 2019 for $56,000. Thecompany expects that machine to be useful for three years. The salvage value is $3,000.

The schedule for this depreciation looks like this:

Calculate the figures in the schedule as follows:

• The depreciable base = $56,000 - $3,000 = $53,000
  The remaining life is how manyyears from the purchase year you assume are left.
• The depreciation fraction designates the sum of the number of years of remaining life asthe denominator. In this case, it is 1 + 2 + 3 = 6. The numerator is the remaining life.
• The Depreciation Expense = (the Depreciation Expense) x (the Depreciation Fraction). Forthe first year, this is $53,000 x 3/6 = $26,500.
• The book value for the machine = $56,000 - $26,500 = $29,500.

Units of Production Depreciation

This method evaluates depreciation based on how much an asset is used. In a period duringwhich the asset has more usage, a company may charge more depreciation. When the assetdoesn’t have as much usage, a company will charge less usage. Here is the formula:

For example, a company that specializes in tailoring garments purchases a new sewing machine.The company will charge depreciation based on how much it uses the new machine. Theinformation for this calculation is in the table below:

First, calculate the rate of units of production. This is:

From this formula above, calculate the depreciation expense. This is the practical use forthe rate of depreciation that companies use on taxes. Accountants can apply the rate andnumber of units produced to every successive year the company uses the machine in order tocalculate the tax write-off amount. For the first year, this is

Double Declining Balance Depreciation

Companies use an accelerated depreciation method to account for the expense of long-livedassets. Companies recognize most of the depreciation for these assets in the first few yearsof their useful life, with smaller amounts of depreciation in later years. Note that thebasis for depreciation changes each year. According to Adams: “The balance willasymptotically approach $0 but never get there. Since the balance adjusts each year, theasset will never be fully depreciated under the DDB system. Most companies opt to switchfrom DDB to SL depreciation when it becomes more advantageous to do so.” Here is theformula:

Periodic Depreciation Expense= Annual Book Value * Rate ofDepreciation

In example 1, a $100,000 asset with a four-year life and $10,000 salvage value, the followingyear-by-year breakdown shows the depreciation.

Assume the straight-line depreciation is $22,500.

In example 2, the company shows the depreciation of a $200,000 asset with a useful life offour years with a salvage value of $20,000. The company does not subtract the salvage valuefrom the base. The assumptions for this:

• The total depreciable amount for the life of the asset is $180,000 ($200,000 - $20,000).
• The annual SL depreciation rate is 25% (100%/4 years). The DDB rate is 50%.
• The beginning period book value is $100,000 ($200,000 x 50%).
• The chart below shows the calculation of the ending period value.

Depreciation stops when the accumulated depreciation reaches the amount of the depreciablebase.

Depreciation and Tax Deductions

Depreciation spreads the cost of an asset over its service life. By reducing the taxableearnings, depreciation reduces the amount of taxes owed. For the purpose of tax deductions,an asset’s service life may be different than its depreciation life.

Depreciation for tax purposes focuses on offering a faster taxwrite-off, whereas depreciation for accounting purposes helps to match revenue with expense.

What Is the Accounting Treatment for the Revaluation of Fixed Assets?

The revaluation of fixed assets helps to reflect the fair market value of volatile assets orchanges to the usefulness of an asset. Revaluation analysis describes the carrying value, orbook value, of the asset, or its value through its life. Although carrying value usuallydecreases over time, under International Accounting Standard (IAS) 16, you can revalue someassets so that the carrying value increases.

Since values for some assets change frequently, revaluation can happen as often as once ayear. More commonly, revaluations occur every 3-5 years. However, you cannot revalue a fullydepreciated asset.

Revaluation Accounting Entry

Carrying amount of non-current assets on revaluation date.
Valuation of non-currentassets (revalued assets price)

Difference = Gain or LossFrom Revaluation

Revaluation: Valuation Models for Fixed Assets

After the purchase of an asset, measure valuation when you need to understand the value ofyour asset before you sell it, solicit investments, anticipate a merger or acquisition,require a loan, prepare a financial report or conduct an audit. Here are two models:

• Cost: In this model, subtract the accumulated depreciation and anyimpairment costs from the original cost price.
• Revaluation: Under IAS 16, subtract the accumulated depreciation andimpairment costs from the current fair market value.

Performing Impairment Testing

Asset impairment is akin to an advanced depreciation, which is when you reduce thepotential benefit from an asset. When fixed assets undergo a significant change incirc*mstance that may reduce their gross future cash flow to an amount below their carryingvalue, apply an impairment test. The impairment may apply to one asset or a group of assets.Below is an impairment journal entry when the loss is $50,000.

Changes to the status of an individual asset do not signal impairment, and, frequently, onlythe estimated service life needs adjusting. These scenarios and similar circ*mstances mayprompt impairment testing. Significant deterioration in an asset’s condition, ahistory ofoperating losses that suggest a future pattern or a significant drop in the asset’smarketprice are all scenarios that might require impairment testing. For example, a 30-year-old,coal-fired power plant is nearing retirement age and a new regulation appears, requiringmillions of dollars in updates. A cost-benefit analysis may show that the investment in anaging plant that’s soon to be taken offline is not worthwhile. If you cannot continuetooperate the plant, you would write off the remaining value of the asset, impair the assetvalue and write it off on your books. If the useful life of the asset or its value changes,it is classified as an impaired asset.

Accounting for Disposal of Fixed Assets

Asset disposal requires that the asset be removed from the balance sheet. Disposal indicatesthat the asset will yield no further benefits. Depending on the value of the asset, acompany may need to record gain or loss for the reporting period during which the asset isdisposed.

Journal Entry for Gain on Disposal

Gain on disposal is calculated by subtracting the accumulated depreciation from the originalcost of an asset and then adding the sales amount. In this example, the asset was purchasedfor $100,000, and accumulated depreciation is $80,000. A buyer paid $54,000 cash for theasset, which results in a gain on disposal of $34,000.

Journal Entry for Loss on Disposal

To calculate the loss on disposal of an asset, subtract the accumulated depreciation from theoriginal cost, and then subtract the sales price. In the example below, accumulateddepreciation is $45,000; the original cost of the asset is $75,000; and the sales price is$10,000. After depreciation, a loss of $20,000 is recognized on the disposal of the asset.

Fixed-Asset Accounting Best Practices

“For your business, the key is understanding the distinction between the capitalizablecostsand those that should be immediately expensed. These costs vary business by business. Butbroadly, if the cost you’re incurring is material and it is necessary to extend anasset’suseful life beyond one year, then that is a cost that should be capitalized,” advisesAdams.

Consider these useful tips when recording and tracking fixed assets:

Always:

• Consider asset impairment when significant events or changes in circ*mstances occur.
• Tag assets for easy tracking. Asset tags allow organizations to track equipment andother assets through their lifecycle to ensure maintenance and prevent loss. Basic tagscan include QR, barcodes or serial numbers and organization contact information. Oncomputer equipment, organizations frequently use the manufacturer’s serial numberoruniversally unique identifier (UUID) for asset tracking. Tracking with traditionallabels requires staff to physically contact the label with a scanning device or recordthe numbers on paper. Today, companies often monitor critical and high-cost assets withradio frequency identification (RFID) tags. Tag materials range from vinyl for minimumendurance, through polyester, to surface printed aluminum and subsurface printedaluminum for high endurance scenarios.
• Review estimates of useful lives regularly.
• Make sure your key assets are covered by insurance, and keep detailed records in case aninsurance claim needs to be filed.
• If an asset can return some gain at the end of its service life, determine thedepreciation on cost minus the estimated salvage value.
• Capitalize assets where the cost is material and the useful life is greater than 12months.
• When recording a fixed asset, include all expenditures to acquire, ship and install theasset. These costs become part of the capitalized cost of the asset.
• If your organization builds an asset and you borrowed money to pay for the work, thecost comprises all components, including materials, labor, overhead and any interestexpense. Capitalize any additions you made to extend the service life or capability ofthe asset.
• The board of directors or senior managers of an organization should create acapitalization policy with a dollar amount threshold. Expense any assets that cost lessthan the threshold.

Never:

• Expense the costs associated with purchasing a fixed asset.
• Confuse tax-based depreciation with GAAP-based depreciation.
• Disregard significant changes in circ*mstances for an asset, as it may be subject toimpairment.
• Depreciate a leased asset over its service life without considering the asset’sproperlife.
• Forget insurance recordkeeping requirements when recording and tracking fixed assets.

Special Cases in Fixed-Asset Accounting and How to Handle Them

Every accounting specialty has unique considerations. Fixed assets usually form a substantialinvestment for an organization, and each asset can include many components requiring specialattention.

When to Record Software and Associated Costs as Fixed Assets

In accounting, software for internal use is treated differently from software purchased ordeveloped to sell to others.

Internal Use Software: When you purchase software or commission softwaredevelopment for your company’s internal use, GAAP specifies that you capitalize somecomponents and expense others. FASB Accounting Standard Update ASU 2018-15 introducesspecific guidance to cover cloud licensing and implementation. Examples of internal-usesoftware that you may capitalize include customer resource management systems, accountingsystems, production management systems, and service contracts for cloud-based systems. Learnmore about these guidelines by reading, “ASU 2018-15 Simplifies the Process forAccountingfor Cloud Computing Expenses.”

In general, capitalize the following:

• Amounts paid to a third party for purchase or development
• Fees for installation and testing of hardware
• Internal or external travel, payroll and contracting expenses that are related todevelopment or installation
• Interest costs related to financing a software purchase
• For cloud-based implementations, costs are amortized over the life of the servicecontract on a straight-line basis

Expense the following:

• Costs to research and shop for the purchase of software
• Fees for software training and maintenance
• Costs for upgrades and additions. If upgrades and enhancements increase functionality,capitalize the costs.
• Charges for the process of converting old data

Software for External Sales:
The developer creating a software productto sell has limited capitalization opportunities. No asset exists in the initial planningand R&D stages, so you must expense costs. During product development, expense costsspent directly towards creating product. Capitalize only the cost of development and testteam salaries and other costs spent directly on the product. After the product launch,expense maintenance costs.

Handling Leasing Fixed Assets

Not all fixed assets are purchased directly. Sometimes, companies lease large machinery thathas a minimal chance of becoming obsolete. In a capital lease, the lessee assumes all theresponsibilities of an owner and treats payments on a long-term lease as fixed-assetpayments. The asset can depreciate and be treated as a debt. By keeping the liability offthe balance sheet, a company can present a false impression of financial robustness. Forthis reason, the new ASC 842 and IFRS 16 standards require public and private companies toupdate their leased fixed asset recording practices to ensure that records reflect trueasset turnover rates and profits and earnings. The new standards present far reachingimplications for reporting and financial and contractual obligations. Learn more aboutpreparing for these changes by reading “Lease Accounting 101—A Roadmap to ASC 842 & IFRS16.”

How to Deal with Fixed-Asset Accounting for an Insurance Claim

When you place an insurance claim on fixed assets, you must take certain accounting steps.Remove the asset from your books, but record the payout as a proceed. You can record thetransaction when payment is possible or when you receive it. The best practice is to recordthe payout when you receive it. Proceeds may cover only the fair market value of the asset.If the insurance policy carries a coinsurance clause, you are required to carry insurance tocover at least 60% of the asset’s fair market value.

“When you are expecting an insurance payout, or, conversely, when you are liable, youmustaccount for the liability or accrue the revenue on your balance sheet if an insurance actionis probable or likely,” Adams says.

Full Reimbursem*nt on an Insurance Claim

If you receive a full payout, record the proceeds and the full value of the loss. However,you still must zero out the total of the loss on your books. For example, if you own an artstore and your $6,000 classroom is totaled in a fire and the payout covers the full amount,then the entry would be:

No Payout from Insurance Company

If your insurance does not reimburse the loss, enter the dollar amount of the damage, andreduce or write off the asset.

Gain or Loss

You may record a loss on your insurance payout. For example, if insurance pays $4,000, recorda loss (debit) of $2,000.

You may also record a gain. For example, if a fire destroyed the same $6,000 classroom butthe payout was $7,000, you have a gain in proceeds of $1,000.

Fixed-Asset Accounting FAQ

Below are the most frequently asked questions concerning fixed asset accounting, as well asthe concise, clear answers you’re seeking.

What Is a Fixed-Asset Accountant?

A fixed-asset accountant is usually a certified public accountant (CPA) who specializes inthe correct accounting of a company’s fixed assets. Fixed-asset accountants often workwithother accounting roles to calculate asset depreciation. They also ensure that accountingdepartments record and track assets correctly as well as handle tax accounting requirementsfor fixed assets.

What Is Component Accounting for Fixed Assets?

Component accounting or component depreciation assigns different costs to different parts ofa large property, plant or equipment asset. Since these components wear out at varying ratesand have different salvage values, each component depreciates separately.

How Do You Handle Accounting for Deposits on Fixed Assets?

Suppose you are buying an asset through installments or loan payments and you make a deposit.If a fixed-asset account does not already exist, you need to create one. Then, post anypayments to the account on the dates you made them. You’ll also want to create aliabilityrecord for the loan and record the loan as a debt. If the organization has not yet receivedthe asset, it is still a current asset, not a fixed asset. In this case, only the deposit isan asset.

How Do You Handle Accounting for Replacing Assets?

Calculate replacement cost by subtracting the accumulated depreciation from the asset valuelisted on the balance sheet. When reviewing a company’s balance sheet, you can detectwhichassets may soon require replacement by looking for assets with a high accumulateddepreciation. For journal entries, use a substitution approach. For example, a manufacturingcompany replaces some machinery for $120,000. The net book value of these assets is $15,000,which is the net value minus the accumulated depreciation of the old assets ($120,000 -$105,000). The journal entry would look like the following:

What Are Fixed-Asset Clearing Accounts?

Clearing accounts provide temporary holding places for cash totals. Rather than requiring anaccounts payable clerk to know each specific destination account, this method allows them towork from the clearing account. The balance is usually 0.00 because the clearing accountgets credited and the fixed-asset account is debited the same amount.

Use clearing accounts when you cannot immediately post payments to a permanent account. Forexample, if you are furnishing a new building for a client, you may place costs and paymentsin a clearing account until the work is complete. If checks must clear and you have the cashto deposit in the bank , you may add the amounts to a clearing account.

NetSuite’s Fixed-Asset Accounting System for Improved Asset Visibility

Dedicated fixed-assetaccounting software can calculate depreciation and record other relevant details.Online platforms remove the burden of multiple manual entries, improve reporting andfacilitate audit trails. Additionally, fixed-asset accounting systems can track assets toguard against theft.

Business owners know that maintaining complete and up-to-date fixed-asset records isn’teasy.What’s more, if you are preparing for any audit, fixed-asset management accounting canbequite daunting. That’s why it’s essential to have the right tools to help youmonitor fixedassets throughout their useful lives. NetSuite’s financial management solutionprovidesreal-time visibility into all of your company’s fixed assets and expedites financialtransactions.

Learn more about how you can use NetSuite to manage yourcompany’s finances and ensure compliance.