Fixed Assets
To track and depreciate fixed assets like computers and equipment, record the purchase at total cost, maintain a fixed asset register, and apply depreciation over the asset’s useful life. Most businesses use the straight-line method, spreading the cost evenly each year, and record depreciation regularly to keep financial reports accurate.
What Are Fixed Assets?
| Aspect | Details |
|---|---|
| Definition | Fixed assets are tangible long-term assets used to generate revenue and not intended for immediate sale. |
| Also Called | Property, Plant & Equipment (PPE) |
| Examples | Computers, Furniture, Machinery, Vehicles |
Costs Included in Fixed Asset Purchase
| Cost Component | Included |
|---|---|
| Purchase Price | Yes |
| Non-reclaimable Taxes | Yes |
| Shipping Costs | Yes |
| Installation & Setup | Yes |
Journal Entry – Asset Purchase
| Date | Account | Debit | Credit |
|---|---|---|---|
| Purchase Date | Computer Equipment | 50,000 | |
| Purchase Date | Cash / Bank | 50,000 |
Fixed Asset Register
| Field | Description |
|---|---|
| Asset Name | Computer, Machinery, Vehicle |
| Purchase Date | Date of acquisition |
| Cost | Capitalized cost |
| Useful Life | Years of use |
| Depreciation Method | Straight-Line / Reducing / Units |
| Accumulated Depreciation | Total depreciation |
| Net Book Value | Cost − Accumulated Depreciation |
Depreciation Methods
| Method | Description | Formula |
|---|---|---|
| Straight-Line | Equal expense each year | (Cost − Salvage) / Useful Life |
| Reducing Balance | Higher depreciation in early years | Opening Book Value × Rate |
| Units of Production | Based on usage | Cost × Usage Ratio |
Depreciation Journal Entry (Monthly)
| Date | Account | Debit | Credit |
|---|---|---|---|
| Month-End | Depreciation Expense | 750 | |
| Month-End | Accumulated Depreciation | 750 |
Disposal or Sale of Fixed Asset
| Account | Debit | Credit |
|---|---|---|
| Cash / Bank | 25,000 | |
| Accumulated Depreciation | 30,000 | |
| Computer Equipment | 50,000 | |
| Gain on Sale | 5,000 |
Tips for Easy Fixed Asset Tracking
| Tip |
|---|
| Use separate asset categories (computers, furniture, equipment). |
| Record depreciation monthly or annually. |
| Reconcile fixed asset register with balance sheet. |
| Use accounting software like QuickBooks, Xero, or Tally. |