Fixed assets are tangible property owned by a business, such as buildings, machinery, furniture, vehicles, and equipment. To be considered a fixed asset, property must:
The acquisition cost of a fixed asset is recovered over its economic life through depreciation, rather than as an expense during a single accounting period.
Before you can enter any transaction related to a fixed asset, the fixed asset itself must be created in Manager. If the Fixed Assets tab has not already been enabled, click Customize below the left navigation pane. Check the box for Fixed Assets and click Update below the list:
Return to the left navigation pane, click Fixed Assets, then New Fixed Asset:
Complete the entry:
Item codeis an optional alphabetic or numeric designation for the fixed asset.
Item nameis the name that will appear for the fixed asset in reports and lists.
Descriptionaccepts detailed information about the fixed asset.
Control accountfield appears only when a custom control account made up of fixed assets exists. Otherwise, the asset is assigned to the Fixed assets control account by default.
Brilliant Industries is adding a packaging machine in its factory. The machine has an expected life of 10 years, so a fixed asset is created:
The fixed asset will show under the Fixed Assets tab with no book value:
To this point, you have not recorded the purchase of the fixed asset. You have only set it up in Manager. Now you can record financial transactions related to the fixed asset.
Purchase of the fixed asset can be recorded under following tabs:
When recording the purchase of a fixed asset under any of these tabs, post the amount spent to the Fixed assets account (or the custom control account you created for the purpose) and the subaccount for the fixed asset you have purchased.
The purchase of Brilliant’s packaging machine is posted, on any of the transaction forms mentioned above, to the Fixed assets control account:
If you purchase the fixed asset using a loan, you should also create a liability account in your chart of accounts with a name something like Loan before you record the purchase transaction. Then record the journal entry as a debit to the Fixed assets or other control account for the purchase cost and a credit to the Loan account of the same amount. Loan repayments must be posted to the Loan account. They have nothing to do with purchase cost, depreciation, or book value of the fixed asset.
Brilliant Industries purchases its packaging machine on credit from the manufacturer, entering the 10,500 cost with a journal entry. The purchase cost now shows in the Fixed Assets tab register:
The purchase cost of the fixed asset will be combined with any other fixed assets’ costs and displayed under the Assets category on the Summary page: