Q:

What do accountants need to know about fixed asset policy?

A:

Quick Answer

A fixed asset policy should address bookkeeping during the purchase planning stage all the way to retirement and disposal, reports the Houston Chronicle. Fixed assets are long-term investments, so it is important to have approval processing techniques and asset tracking for each item.

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Full Answer

It is common to have a member of the management team review an approval letter for the purchase of a fixed asset, mentions the Houston Chronicle. In this letter, it is important to list the projected cost of the asset from multiple sources as well as detailed descriptions of the product offerings. Each asset needs to have a unique tag number to distinguish it from other assets in the same category. Accountants should compile a master list of all fixed assets, which displays the asset name and relevant tag number.

Accountants can contact the manufacturer of each fixed asset to understand the warranty options, reports the Houston Chronicle. The Internal Revenue Service defines fixed assets as items having a useful life of more than one year. During this useful life, it is appropriate to expense a portion of the fixed asset and write it to the depreciation account. Business owners can then provide an appropriate fixed asset retirement policy so that the accountants can adjust the relevant asset and depreciation accounts accordingly.

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