Assets are important to your organization and help you accomplish your mission. Tracking those assets is just good management practice and provides for internal controls. Form 990 requires reporting on signification disposal of assets, but tracking asset information also helps you budget for replacement of those assets. Disposing of assets may have tax consequences, so it is important to record disposals correctly.
When events like Hurricane Sandy or other disasters occur, having a good fixed asset system in place provides you with solid data to report what was lost, file insurance claims, and get back to business quickly.
Assets can be current or long-term. Long-term assets are usually called fixed assets in the accounting world. Fixed does not mean immovable. Fixed means it is an item or intellectual property that will last or be used for more than a year.
My super-duper purple power stapler is a huge asset (to me!) and necessary for my everyday tasks but is not an item tracked as an organization asset. Should a natural disaster strike, everything lost will need to be replaced. Even though all the staplers may have whirled away in a tornado, staplers are not the type of items classified as assets for accounting purposes.
Fixed assets are items intended for continuing use and are used up over time. Each item will have a recognized life. A building will have a life of 20 years or more. A vehicle may have a life of only three years. Depreciation expense is recorded to recognize the wearing out or “using up” of the asset.
While my purple stapler may be heavy duty and last 20 years, the cost of the item plays a role in determining asset status. Organization policy usually dictates the cost threshold for determining asset status. Accounting rules are also considered. So while my stapler might outlast some vehicles, the cost for stapler will eliminate it from the asset list.
A good fixed asset system will provide for quick and efficient asset entry at the time of purchase, accurate tracking, customized depreciation calculations, and user-friendly reports for quick analysis. Here are 5 features of a good fixed asset system.
- Quick Asset Entry – Wouldn’t it be nice if assets could be entered into the fixed asset ledger when the invoices for the asset purchase are entered into the system?
- Track Asset History – Be sure you can track warranty information, manufacturer information, serial numbers, and repair history into the asset record. You may scan and attach important source documents directly to the asset record.
- Depreciation – Use one of four standard depreciation methods or even better find a system so that you can set up customized depreciation methods to generate accurate journal entries to record depreciation monthly, quarterly, or annually.
- Accounting Entries – the system is capable of complex journal entries to distribute expenses across programs, departments, and more using percentages or units such as square feet.
- Reporting – You can easily analyze depreciation calculations and accounting entries with detailed reports before you accept the figures.
And, yes Sage 100 Fund Accounting’s Fixed Asset Module does all of the above. Want to learn more? We have two webcasts coming up:
The How and Wow of Tracking Fixed Assets With Sage
Thursday, January 31, 2013 at 2 p.m. ET and Wednesday, February 13, 2013 3 p.m. ET Register Now
Laura Reifschlager
Trainer
Sage Nonprofit
Abila blog 