Fixed Assets

Fixed assets are large ticket purchases that have an extended utilization with life. They are not typically sold in the due course of business and as such they are allocated via depreciation to the income statement.

Fixed Assets Turnover Rate

Fixed Assets Turnover Rate

The fixed assets turnover rate is another activity ratio whereby an income statement financial characteristic is compared to a balance sheet asset section.    In this case, comparing adjusted sales against historical cost of fixed assets.   This financial business ratio is only effective for business operations that are fixed asset intensive.  So with service based industries like carpet cleaning, professional firms and medical practices this particular ratio is impractical.

Bookkeeping – Complex Entries Expanded (Lesson 66)

Complex Entries

A journal entry with multiple lines of entry affecting several different ledgers (accounts) is commonly referred to as a complex entry.  Many bookkeepers shy away from them as they feel intimidated by the difficulty involved and do not want to make an error.  This lesson helps the bookkeeper understand how to break the complex entry down into a series of standard entries.

Bookkeeping – Amortization (Lesson 53)

Amortization

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.  As a bookkeeper it is your job to maintain the amortization schedules, report the information correctly and interpret the results for management.  

Bookkeeping – Introduction to Depreciation (Lesson 50)

Depreciation

Depreciation is the process of allocating the initial capital outlay for fixed asset purchases over time to the income statement.  The basic principle is that any fixed asset has a predetermined lifetime based on time, usage or fair market value.  Your job as the bookkeeper is to assign depreciation expense to the respective asset and record the entry as a function of daily operations.

Internal Controls – Fixed Assets

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 is financial in nature related to errors in determining cost basis, useful life, and depreciation assigned; all of which can affect value.

Each risk uses a separate set of controls to minimize or eliminate the exposure and reduce management’s concern that the financial value as reported is incorrect.  This article explains the standard set of controls for each risk group.

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