No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted by Sections 107 or 108 of the 1976 United State copyright law, without either prior written permission from the publisher or permission through payment of the appropriate fee per copy to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA fax. Wade Moorehouse, retired professor of accounting and former chair of the Department of Business and Economics at California State University, Hayward, who many years ago, when I was an undergraduate student in his accounting course, stimulated my enthusiasm for the accounting function.
About the Author
Preface
This collection of publications represents most of the information available on fixed asset accounting. The objective is to provide not only asset accounting, but to incorporate this accounting into a process that will allow management to get the most out of the company's investment.
Accounting for Fixed Assets
What Is Accounting for Fixed Assets?
The transaction or other event giving rise to the Company's right to or control over the benefit has already occurred. This reflects the idea that research and development costs will be used up over the life of the research project.
What Is an Asset?
Then it is correct to include those cleaning costs in the costs of the land. Costs for preparing the room for installation (foundation, special walls, removal of windows).
Classifications of Asset Transactions
A trucking company involved in transporting freight is likely to require a distinction between light and heavy trucks. the life of heavy trucks will be longer than that of light trucks. Coding of accounting transactions is defined as "the assignment of numbers, letters, or other symbols according to a systematic plan to distinguish the classifications to which each item belongs and to distinguish items within a given classification from one another."
Determining Base Unit
These definitions prove the difficulty in documenting the basic unit concept. The designation of a basic unit and its real estate registration class should be easily distinguishable by different people. The value of a base unit should generally not be lower than the minimum capitalization policy established.
Each of the major components of the building must be established as a base unit when it is valued at more than $1,000 and has a life expectancy greater than two years. Each base unit will be recorded separately as an asset and a property record will be maintained. Items that require monitoring for appropriate maintenance and replacement should be included as a separate base unit and property record item.
Policies should be written to clearly and consistently define what a new base unit will be.
Control of Property, Plant, and Equipment
If a ten-ton truck is used for a one-ton job, it is not the best use of resources. Management must provide procedures that, if followed, will ensure that resources are used to the maximum extent possible and to the benefit of the organization. Exceeding capital budgets will be notified to the managers involved.
It does not have to be a full-time position, but it must be a significant part of the custodian's performance measurement. In this section we discuss how to ensure that the asset ownership record is part of the control system. The number assigned to a record may contain a description such as "100 meeting room chairs". The building number and room number can determine both the location and the correlation with a property record number.
In the example of the inventory at the start of a new ambulance crew shift, it is not just about the security of the equipment.
Asset Policies Manual
The asset accountant is responsible for the overall management and control of the property records system. All dispositions of real estate shall be approved by the chairman of the budget committee and the controller. This field will be used to allow income tax calculation of the alternative minimum tax.
Please note that this is the serial number of the base unit involved. This field contains the identification code of the department that uses or is responsible for the property record. This is the name of the department manager responsible for maintaining the property record for this record.
Unit managers will be notified before the end of the tenancy so that alternative action can be taken.
Establishing Value
Insurance rates are based on a percentage of the value against which the property is insured. In reality, corporate property tax procedures call for the market value of the property as the assessed value. It is also important to record and maintain the value of the assets.
When purchasing a going concern, the selling price is likely to differ from the book value of the property, plant and equipment. This is one of the few times that book value can be reduced on a still useful asset. Then it will be necessary to conduct a physical review or inventory of the remaining property.
Potential buyers recognized that the market value of individual components of a business is worth more than their actual return.
Allocation of Costs to Accounting Periods
Accrual accounting is intended to reflect in the current accounting period the expenses applicable to the activities of that period. It is necessary to determine the estimated useful life of each item of property, plant and equipment as it will be used in the entity concerned. When determining the estimated lifespan, consider the lifespan of similar items the company has used in the past.
Determine which policies can be changed that will affect the actual lifetime of an item in the organization. Examples are accelerated depreciation, which allows large deductions and thus lower taxes in the early life of the assets. Another book in the John Wiley series, Financial and Auditing Guide for not-for-profit Organizations, Sixth Edition by Malvern J.
The costs of laying pavement at a road department cannot be calculated unless depreciation is included in the calculation.
Regulated Utilities
Total equal to the total cost allocations to support the service charge determination. Small items are items that are smaller than a base unit; they are included in the cost of a pension or real estate unit. The costs of purchasing, constructing and improving real estate must be recorded in the appropriate real estate account.
Excavated material consists of the costs of removing material, removing it and dumping it. Real estate operating costs must be reported as part of an itemized real estate account. The records shall separately show the cost of each structure included in the bill and the purposes for which it is used in the operation of motor carriers.
It also includes the cost of buildings and other improvements constructed on the property.
Government Accounting
This set of accounts is maintained to maintain a record of the initial cost of assets purchased and placed in service. According to GASB statements, governments may continue to use fund accounting; however, in addition, they must issue general government-wide financial statements on a full accrual basis. Should they be current taxpayers, future taxpayers or service users (cost drivers).
The creation of the GASB was the result of widespread dissatisfaction with the way in which government accounting and financial reporting measured the performance of government entities. Similarly, it has been estimated that courtrooms in the United States are used 10 to 20 percent of the time. Since there was no requirement to keep property records in the past, obtaining all the information will require a significant undertaking.
An analysis of the response should be done, narrowing down the list to a few vendors before detailed analysis is done.
Not-for-Profit Accounting
DEFINITION OF ACCOUNTING OF NON-PROFIT ORGANIZATIONS The FASB, in issuing Concept Statement 4, addressed a definition for non-business organizations. Accounting definition of non-profit organizations 137 There are many non-profit organizations. ACCOUNTING PROBLEMS OF NON-PROFIT ORGANIZATIONS Donations are the main source of capital for asset purchases.
Only public accountants engaged in a highly specialized accounting practice deal with nonprofit organizations. The provision of many services by non-profit organizations is funded by government, tax grants or cost reimbursement contracts. Additionally, the pricing of cooperative ventures by non-profit organizations requires total cost review.
It provides the basis for consideration of the specialized accounting principles of non-profit organizations.
Creation and Verification of Property Records
The proprietary data file will be used to provide the information needed for asset management. This allows the property data management system to create a new record for the item and dollar amounts in order to balance in the general ledger. It is necessary to have a property records manager who is responsible for ensuring that property records are maintained.
The property records manager will have more knowledge of this system than anyone else in the company. This can be sent to the asset manager for input into the real estate registration system. This deferred maintenance assessment, which is placed in the property file, can give the manager an estimate of future maintenance needs.
The information recorded in the property records database enables a number of reports to be created for management.
Computer Programs
Therefore, it is necessary to review and choose the one that meets most of the needs of the company or have a specially written program. Some standard packages can also be adapted to specific needs. This is a good way to review the software's capabilities and familiarize yourself with the program.
Most systems are adapted to produce the depreciation portion of property data. Much more staff time will be spent on setting up the system than the cost of the package if it is an inferior product or unsuitable for the company's needs; and the availability of future maintenance updates are very important. They range from $150 to $3,000, and the price alone is no indication of the features it offers.
This is a computer-generated report that lists all assets and the information that includes them.
