Tag: Fixed Assets
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Bookkeeping – Policies and Procedures (Lesson 96)
At the peak of the hierarchy of internal controls sits policies. Policies are written by the highest echelon of management for a company, its Board of Directors or Trustees. The upper tier and mid level management of a business develop procedures to carry out the policies of the company.
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Bookkeeping – Complex Entries Expanded (Lesson 66)
A journal entry with multiple lines of entry affecting several different ledgers (accounts) is commonly referred to as a complex entry.
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Bookkeeping – Amortization (Lesson 53)
Amortization is similar to depreciation whereby an asset’s cost is allocated to the expense over time. There are several differences with amortization. Amortization is used with intangible assets and the method is almost always straight line.
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Bookkeeping – Depreciation Schedules (Lesson 51)
When a small business purchases fixed assets two financially based opposing forces come into play. The first is the financial reporting desire to present information in a fair manner so management can make good financial decisions. The opposing force has to do with taxation.
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Bookkeeping – Introduction to Depreciation (Lesson 50)
Depreciation is the process of allocating the initial capital outlay for fixed asset purchases over time to the income statement. The basic principle with depreciation is that any fixed asset has a predetermined lifetime based on time, usage or fair market value.
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Bookkeeping – Fixed Asset Purchases (Lesson 49)
Every now and then management authorizes the purchase of a long-term producing asset. This could be a vehicle, piece of equipment or real estate. These purchases are referred to as fixed assets.
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Internal Controls – Fixed Assets
Internal control is a subset of the accounting system to aid in proper reporting of existing assets and liabilities. Internal controls over fixed assets alleviate two distinct risks. The primary risk is physical in nature and relates to the asset getting lost, stolen or damaged thereby affecting the value as reported on the financial statements. The second risk…
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Capital Gains – Introduction to Fundamentals
When an individual or business sells an asset, the gain or loss is classified into one of two distinct tax groups – ordinary or capital. The tax classification is strictly tied to the nature of the asset sold. For most businesses, the assets sold are inventory.
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Lease or Buy
Fixed assets are normal in business operations. However, financing those assets is the critical issue. If you buy the asset outright, you tie up capital that can be used to expand operations or keep overall costs low in operating the company.
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Capital Expenditures – IRS Definition
The Internal Revenue Service uses a complex definition to identify capital expenditures (assets). A capital expenditure is not deductible as an expense in the tax year purchased; the taxpayer or entity must use depreciation, amortization or depletion to obtain deductible value on the entity’s return.