Fixed asset verification: The right way to manage company’s assets

Fixed asset verification: The right way to manage company's assets

Any natural or legal person having the quality of trader must check, at least once a year, the existence and the value of the elements of the heritage assigned to the professional activity. But the physical inventory is also an indicator of the quality of the company’s processes.

The obligation to take a physical inventory means that every company must count and value everything it holds, once a year.

In modern management, it is a matter of cross-checking this physical count with other data available in the information system: companies now often have inventory management software and, in any case, accounting.

The faithful image of the company’s assets logically depends on the consistency of the databases with what exists tangibly.

The inventory: An indicator of the quality of the company’s procedures

The databases (therefore ultimately, the book values) must be adjusted according to the quantities and values ​​physically observed.

It goes without saying that in the event of a significant discrepancy between the count and the quantities entered in the books or computer files, good management practice will require that we seek to explain these discrepancies, which reveal malfunctions.

Faced with a problem of significant discrepancies, the business manager will have to carry out the physical verification, not only to remedy an obvious problem (an asset has disappeared or, on the contrary, an existing fixed asset was not listed in the software) but also because it will be necessary to establish an accounting justification of the adjustment entry correcting the value of the assets recorded in the balance sheet.

An agile company concerned with representing, on the balance sheet, a faithful image of its assets will adopt a precise physical verification procedure, leaving no room for improvisation.  The inventory procedure mobilizes the teams and often requires “freezing” the company during the counting time. It is therefore necessary to act quickly and well.

Carrying out physical verification of fixed assets is important for companies since this allows them to know exactly the state and location of the assets in a company.

To carry out this activity correctly within companies, a series of steps and recommendations must be followed that will allow it to be carried out in the best possible way and that everything goes according to what is required.

What is needed to do physical verification?

In the first place, it is necessary to resort to a person who knows all the steps to carry out this process in an adequate manner, since qualified personnel will be able to identify all those assets that must be marked with an identification number through plates and labels for asset control.

Once each of the assets within the company has been identified, the data and information of the assets will be obtained so that the identification plates and labels of each of the assets can be generated.

It is important to consider that the inventories of fixed assets must be carried out constantly, to keep the information updated and ensure economic losses are not generated due to errors in depreciation, or lack of equipment.

This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by

CA Aman Aggarwal

AKGVG & Associates

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