Fixed Assets

These are large ticket purchases that have an extended utilization life. They are not typically sold in the due course of business and as such they are expensed through a system called depreciation.

Fixed Asset Turnover Rate

The fixed asset 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 …

Fixed Asset Turnover RateRead More »

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.   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 …

Bookkeeping – Complex Entries Expanded (Lesson 66)Read More »

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.   As a bookkeeper it is your job to maintain the amortization schedules, report the information correctly …

Bookkeeping – Amortization (Lesson 53)Read More »

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.  Here the business desires to report less profit to reduce the …

Bookkeeping – Depreciation Schedules (Lesson 51)Read More »

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 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 …

Bookkeeping – Introduction to Depreciation (Lesson 50)Read More »

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.  Recording of these entries is a little different and this lesson explains the entire recording process associated with fixed assets.  I’ll explain the …

Bookkeeping – Fixed Asset Purchases (Lesson 49)Read More »

Fixed Assets To Debt Relationship

Every business owner, especially young entrepreneurs, must understand how long-term debt  is used to finance the purchase of fixed assets . It is a basic principle especially for start-ups. There is a relationship that exists between the two. If created correctly, profitability is enhanced and cash flow is maximized. But most business owners lack the knowledge about …

Fixed Assets To Debt RelationshipRead More »

Internal Controls – Fixed Assets

Internal controls is an 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 …

Internal Controls – Fixed AssetsRead More »