1. Fixed assets are tangible assets that are employed in the business to generate revenue/income. This assets are not intended for resale in the normal course of business. Typical examples of fixed assets are items such as property, plant, and equipment.
2. The purpose of its use distinguishes a fixed asset from other assets in the business. As mentioned, fixed assets are not used for resale to customers unlike its inventory. For example, a restaurant have its premises, tables, chairs, kitchen equipment, lightings as its fixed assets. Its inventory will consist of food and beverages that it sells to its customers.
3. In the financial statements of a business, fixed assets are reported in the balance sheet. Fixed assets are usually of significant value and therefore form a substantial share of a business’s overall net worth. Their value are decrease over time through depreciation, which is reported in the profit and loss account as an expense.
4. Due to its high value, it is important for a business to track and maintain accurate and complete records of its fixed assets. This tracking and maintenance of fixed assets process typically involves creating a fixed asset register that includes information such as the asset’s description, location, acquisition date, cost, useful life and depreciation amount. Accurate record-keeping of fixed assets is essential for financial reporting, tax compliance, insurance, and decision-making purposes. It can also help with the efficient management of fixed assets, such as identifying assets that are underutilized or require maintenance.
5. Through the fixed assets register, a business will be able to manage these assets effectively. For example, the details of all purchases of fixed assets for the business must be recorded in the register. This includes the cost of each purchase and any associated taxes or fees. In addition, records of maintenance and repair work performed and calculations of depreciation can be updated on a timely basis.
6. Businesses should also establish a system to monitor and report on the condition of each fixed asset, as well as procedures for disposal when they become broken, under utilised, obsolete or no longer needed. It is also crucial to ensure that all fixed assets remain correctly secured and protected from theft or damage caused by natural disasters, fires or accidents. This can include installing a security system or buying insurance policy.
7. As you can see, fixed assets are a vital part of the business. Businesses should regularly review their fixed assets to identify any opportunities to reduce costs or increase productivity through increased utilization of these assets. By taking these steps, businesses can ensure that their fixed assets are managed effectively and efficiently to maximize their value over time. If you need help to understand how fixed assets can work for your business, please come and talk to us. We at PL Biz Consulting Pte Ltd have the expertise and dedicated accountants to guide and assist you.
