If you are running a business then you most likely have assets that you have to keep track of for accounting and tax purposes. Assets can be short-term and easily converted to cash like cash equivalents and stocks, or more long-term like buildings and equipment. Today I will be going over how to keep track of long-term assets often called fixed assets. Fixed assets are assets that you use for your business for more than one year. Fixed assets could be buildings and equipment like I mentioned above, or things like office equipment, furniture, vehicles, even copyrights. Whether you are managing just a few assets or hundreds, staying organized and keeping good records of your assets will save you time and money. It could be as simple as having a dedicated binder or a section of a filing cabinet if you have just a few assets, or using barcodes and asset management software if you have a larger operation.
For simplicity, let’s say your business has 20 assets and you want to start a binder. First get yourself a binder with some dividers. Next, subdivide your assets into categories that make sense and label your dividers. For example, office equipment, office furniture, vehicles, machinery, buildings, etc. Now you are ready to file your assets into your binder (or cabinet). Include all relevant information about your assets. The purchase receipt, invoices for any setup costs or repairs, as well as titles, insurance policies, and licensing costs. This way you have everything about your asset on hand in case you get audited or sell an asset. Next include your asset’s depreciations schedules from both your accounting method and tax method.
A Side Note About Book/Tax Depreciation Methods
It’s likely that your assets will have two separate depreciation schedules. One for your books and one for your taxes. The most common method used for bookkeeping purposes is the straight-line method though you may use another method. The straight-line method takes the amount you paid for the asset minus its salvage value, and divides that amount by the amount of years the asset is estimated to be of service. Each year your asset will depreciate by that amount in your books. You can break that amount further down into quarters or months as needed and that will be your depreciation schedule for your books.
Your depreciation schedule for your taxes will look a little different depending on what your assets are and what tax strategies you use. If you use an accountant to file your taxes you can talk to them about your depreciation schedules and get copies for your records. If you do your own taxes here is a helpful link to learn more about depreciating property for taxes: https://www.irs.gov/publications/p946
By having all of your assets organized with their corresponding documents and depreciation schedules you will quickly be able to find, analyze, and record information about your assets quickly and accurately. I hope you found this post helpful. If you have any lingering questions about this topic please post it in the comments.
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