Do you have fixed assets? If you’re an entity that owns buildings, machines, vehicles, computers and so forth, you have fixed assets and you should track them.
An asset tracking system is important for accounting purposes to make sure you have included all eligible assets into your calculation of depreciation expense. This is essential to make sure that you report this amount properly on your income tax calculation. Depreciation is a non-cash expense and can have a substantial impact on your profit and loss statement, along with any taxes due.
You should also track your fixed assets for insurance and replacement purposes. If your building(s) were destroyed by flood or fire, having an accurate list of what you own makes filing a claim much easier. If you suffered a break-in, an asset tracking system will help you to easily determine if anything was missing.
How do you set up an asset tracking system?
The first thing you have to do is to determine what information you need to capture. The following list is the basic information required to track assets.
Asset Location – where is it
Asset Number – unique number assigned by owner
Asset Description – short description
Acquisition Cost – what it cost
Acquisition Date – when you bought it
Depreciable Y/N – do you depreciate this asset
Depending upon your management and accounting needs, you can add other information. Once you have a spreadsheet with these headings, you take a physical inventory of your assets. As you do the inventory, you put an asset identification tag (asset number) on each item.
With this basic information, it’s easy to manage your assets. You can sort your assets by any category. Your accounting department can easily transfer this information to a fixed asset tracking and accounting software program. A copy of the information should be maintained “off site” with your regular accounting records.
You should be able to change the asset location and add a disposition date to keep your asset tracking system up to date.
An asset tracking system can be as simple or as complicated as you want it to be. It should allow you to know what you own and where it’s located. The basic system outlined above can be sorted so you know how many vehicles you own and where they’re located. You can sort by location to know what’s at a specific site.
Setting up any asset tracking system can take a substantial amount of time. It is, however, worth the investment since you can manage your assets easily.