Fixed assets accounting and recording – why is so difficult for some?

We were sent a fixed asset register report by a client recently. This had been maintained by us in dedicated fixed asset software for over 25 years. Nothing fancy or expensive – all that was needed was to record additions and disposals of assets, profit or loss and calculate depreciation. It coped with departments, different types of assets, plant, vehicles, fixtures etc.

A new internal accountant was appointed at the client, and the first thing they did was take the outsourced work back in house. Data was exported from the fixed asset software to a csv file and they imported it into Excel and maintained it in that format for the last 12 months.

A quick review of the Excel file indicated negative assets on several lines – due to disposals which could not be matched with a purchase. These negative lines also had negative depreciation calculated!

There were some late postings in the accounts in 2018 which should have affected the register, but these were never processed, so went through in 2019 – which caused more confusion. Hours of “fun” trying to sort out what was going on.

They could have bought the fixed asset software for around £400 and carried on with it!

Several accounting software products have integrated fixed assets modules. Assets that are posted to fixed asset codes then also appear in the asset register screens. Despite training and numerous requests since, some clients persist in classifying small items of expenditure as fixed assets. By small, it could be £3 for a USB lead for instance. It all takes time to both recode the original transactions and remove from the asset register screens.

A review of fixed assets registers with clients is recommended. It is surprising how often assets have been “scrapped” or sold with the proceeds not actually hitting the business bank account!

How often is a fixed asset register requested on hand-over, when taking on a new client and nothing is supplied? “We don’t keep one” is often the answer. Whilst not essential, it does make a mockery of the figures when there is an opening balance at book value, additions at cost are added in and disposal proceeds are deducted, with depreciation then calculated on the remaining book value.

 

Brought forward     £9,000

Additions                 £ 5,000

Disposals               -£2,000 

Sub Total                £12,000

Depreciation 25%- £ 3,000

Carried Forward      £9,000

Only rarely do assets appear to be sold for more than the original cost, but this can get overlooked when preparing the tax computations.

Related to fixed assets are finance agreements. We recently, at the client request, entered a fixed asset and the related HP, claiming only 50% of the VAT. Despite telling him how to post the repayments, he claimed VAT on the deposit and three-monthly repayments. The reclaimable VAT had been processed in the prior quarter leading to a repayment.

Whilst Excel is generally good for figures, fixed assets registers is one of those areas where dedicated software has a significant advantage. Would you agree? Or do you use Excel (or similar)?

Anonymous