How to track the status of fixed assets present in a business?

Physical verification of fixed assets is an abstract process that has a physical base. However, it so happens that this is an activity that is not preferred by companies, it is rather one that they shy away from because it requires thoroughness and a lot of dedication.

There is nothing more wrong than that. The verification should not only be carried out from time to time in any company but each of its steps and methodology should be controlled in detail, especially when it comes to its fixed assets, which are the goods that support its operability.

Let’s first define what is meant by fixed asset inventory. Well, it is not just a list of things, something more accurate would be to say that it is the document that records the assets of a company or natural person, made up of current and non-current assets.

Through this document, we can know the real value of a company, identify inconsistencies if present, and correct errors found in the maintenance or storage of assets.

And its most relevant features are:

  • Detailed, since it records not only the assets available but also the characteristics and documents related to each one of them.
  • Ordered, because it works on it following certain patterns, grouping assets by their common characteristics.
  • Valued, since each good is recorded with its respective economic value.

Given the breadth and the different needs of businesses, there can be many types of verification, including:

  • Periodic verification
  • Fixed asset verification
  • Verification of raw materials, among others.

Now, regarding what is fixed assets inventory, they are the ones that focus specifically on the goods that will remain in the company for more than one fiscal period, which are used to produce other goods or sustain the operations of the company. But above all, those which are going to capitalize.

What information should an inventory of fixed assets contain?

Although inventories are tailored to the needs of each company and should ideally be kept within an automated fixed asset control system, there are certain basic data that they must contain:

  • Identification code: Each of the goods must receive an identification code to be more easily located in the file.
  • Asset name: The name, type of asset, and brand.
  • Description: All colors, shapes, and other characteristics.
  • Location: As it is necessary to know where each of the assets is physically located, we must record where they can be physically found.
  • Type of acquisition: It will be recorded how the fixed asset was acquired for accounting references, also if they are in a loan or rental condition.
  • Acquisition date: Likewise, the date of acquisition will be necessary to know the depreciation of the movable asset.
  • Discard or sale: Assets sold, discarded, or written off should be recorded to avoid future confusion.
  • Date of discard or sale: Just as relevant, it will be to have information on the date on which the discard or sale occurred.

Who carries out the inventory?

The inventory is a document of vital importance for any organization, therefore it should not only be the responsibility of the logistics or warehouse department, of course, it should also overseeby the accounting department. And both must lead a job that concerns the entire company. Even more so if we consider that it must be constantly updated.

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