What is a Fixed Asset?
“It is a long-lived tangible or intangible non-monetary resource that is held in an entity for the purpose of being used in the production of products or services and that is not sold in the normal period of the entity's activities”.
It is defined as the assets that a company uses continuously in the course of its operations to be exploited and put at the service of the company to generate profits, which is why the fixed asset It cannot be sold in a short-term period and must be kept in good condition that allows it to have a long life. At the end of its useful life it can still have value despite being considered “scrap.” and this can help the company, although the investment is not completely lost, since this asset has already produced profitability throughout its useful life.
For example: the machinery and equipment which helped with the production of products that are marketed by the company that acquires it and therefore the investment must already be recovered before its useful life ends.
In general, the fixed asset is one that is part of the property, plant and equipment, such as automobiles, machinery, buildings, furniture, land, etc., however, those assets that are not tangible are also taken into account. Like trademarks and patents, in this category of patents it is very important to comment that it is not depreciated, it is only amortized as tangible fixed assets.
A tangible fixed asset depreciates over time from the time it is acquired, its depreciation begins, therefore it is important to have control of annual depreciation rates that are legal in Mexico.
If you need more information about this, consult our article
How is fixed assets divided?
The fixed assets of a company are mainly divided into two forms:
- Tangible Assets: They are those assets that have a physical presence and that is why we can see and touch them. In this category we can include:
- Office team
How can good fixed asset management help my company?
Since a fixed asset is a good that can be sold in the long term, we can take it into account for emergency situations such as; closing of the company, bankruptcy or liquidity for long-term debts.
It is also necessary to have a good control of it in order to consider the following factors:
- Sale before full depreciation
- Knowledge about depreciation and present value
- Review of Capex or Investments of Fixed Assets by CGU
- Helps create financial reports in an accurate manner
- decision making
- Determine the financial health of the company
What is fixed asset accounting?
Basically it is the detailed record keeping in the financial records of the company according to the fixed assets, this can be best explained in 5 stages from the beginning to the end of the asset.
When the fixed asset for the organization is obtained or purchased and placed in the accounting books.
The value of the asset is decreased by one of the methods.
Evaluate the current value in the market at that time.
Reduction in value due to some unexpected event that occurred.
Sale or derecognition of the asset
Sale, cancellation or replacement of the same.
What is the difference between fixed and current assets?
We can differentiate it since a fixed asset is going to depreciate and is convertible into liquid within a period of more than one year, on the contrary, current or current assets can be converted into cash in a period of less than one year and do not depreciate, in this type Assets can be cash or cash equivalents, accounts receivable, inventory and expenses paid in advance, this must be linked to the star activity of the company and it is expected to be sold or consumed in the common period of exploitation.
What is a deferred asset?
These are all the goods/services that the company will pay for in advance but that are intangible, some examples are:
- pre-operating expenses
- Installation costs
- evaluation studies
Accounting these are considered as expenses but they do not appear or affect the information financially until they are used, but they must be recorded in the balance sheet as a long-term asset, a great advantage of acquiring goods in this way is that they do not have to be recorded from the beginning, therefore it favors the numbers that are declared in accounting periods prior to the use of this asset.
However, when a company uses its accounting base in cash, the expenses must be recorded immediately in the payment account, therefore they do not apply to deferred assets.
How to manage the fixed assets of your company?
Since the fixed asset is a very important part which is taken into account even for the evaluation of profitability by a financial expert, its management is even more important, since it is essential to visualize the current state of the company financially and to know where each one of them is found, who is responsible, the outputs and inputs, the depreciation rate, etc.
Therefore, a tool that can facilitate this management is fixed asset software such as SAAF, where you can view from any device with an internet connection the general or detailed report of each requirement you request regarding fixed assets, as well as select administrators who will be able to edit the information entered there, reports, detailed information, etc.
If you want to know more about the tool that will make your work easier and improve your efficiency, contact an Anepsa advisor and ask about all our service offers.