Fixed Asset Accountability      0033-01   ZZall

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                              TO: Interested Ministries                                                            FROM: Jim Bramer, Retired CPA-Auditor  
                                                                                                                                        FILE: 0033-01/all

                               RE: Fixed Asset Accountability                                               ORIGINATED:  March 1985                                            


INTRODUCTION

        Ever before us is the need for accountability of all "Land, Buildings and Equipment- LB&E"; yea physical inventory of furniture and all types of stationary and mobile equipment. Please Go Here  for more on this topic.
        Many of you have not given this priority down through the years, but in order to comply with Generally Accepted Accounting Principles (GAAP) it is now necessary to show depreciation as an expense for all nonprofit organizations. Plus it is desirable for more complete insurance coverage. This means you need greater documentation and accountability of these tangible assets.  Click Here for some February 2008 information on this topic
        May we suggest the following:

INITIAL PHYSICAL INVENTORY

        A. Obtain a written record of some type (a card or ledger) for each item or group of like items. It would contain at least the following: I.D. number (see below regarding sticker); adequate description of item; approximate date of acquisition; cost or cost equivalent (see below); approximate life span; user and location information.
        B. Inventory the fixed assets and complete the record. We recommend that you place an I.D. sticker on applicable piece for future accountability and reference.
        C. This provides an excellent project for volunteers or when your staff is "caught up."

COST OR COST EQUIVALENT

        What did we pay for this item 10 years ago? We don't have any of those old invoices! Ugh!
        The emphasis in this process is accountability and the original cost is not absolutely necessary. Therefore, it is not crucial for you to dig up all those old records, etc. If you cannot locate the recent invoices, please use your best judgment of its original cost or obtain information from current insurance appraisals or property tax appraisals, etc. We recommend that you not inventory, for these purposes, items costing $100.00 or so (this amount may be different for larger organizations). Please bring on donated items at their estimated value when received.
        We recommend the term
"Cost Equivalent" to accommodate the variety of "dollars" placed in this inventory.

DEPRECIATION - IS IT NECESSARY?

        Yes, as indicated above, it is now required for GAAP, but it really isn't that difficult. We advise against laboriously accumulating the amount of depreciation since date of acquisition on each piece of fixed asset in inventory.
        We recommend that all items be classified within life spans and you use the   "block" method' of depreciation computation by year and by life span as demonstrated below:

    -- Year FAssets Acquired ---    Grand Accumul This Yr's      Total
Life %

1998

1999

2000

    Total    Deprec    Deprec     Accum
Span     Deprec
5 yr

20

5,000

4,000

1,000

10,000

2,600

2,000

4,600

10 yr

10

1,000

300

3,500

4,800

250

480

730

15 yr

5

3,000

3,500

3,500

10,000

633

500

1,133

Totals

9,000

7,800

8,000

24,800

3,483

2,980

6,463

WHAT HAPPENS WHEN WE GET RID OF AN ITEM?

        Set up and use a "Gain/Loss on disposition of Fixed Assets" account, or simply use below the existing "Net Investment in Fixed Assets" equity account. Remove the computed year to date (do not make partial year computation for the year of disposition) amount of previously accumulated block depreciation for that specific fixed asset and charge it to the above account. Then place, in the same account, the "Cost Equivalent" from respective "Fixed asset" account along with any applicable sales proceeds. This information will show up in a special place within your year end report.

AT THE END OF THE FISCAL YEAR:

        Not only will you have to be sure of the foregoing entry, but you will need to also account for any "Fixed Asset Procurements" acquired during the year by any "Operating Fund" or "Special Fund" as an "Expense"; followed by balancing the Fixed asset subsidiary (listing of each fixed asset, etc.) to the control accounts in the general ledger. You would then compute the block depreciation for the current year.
        This includes some type of "capitalization level" --- like everything that costs $500.00 or more should be added to this depreciation schedule, or capitalized, etc.  In all of this effort, do not loose sight of the need for "tangible asset accountability" for such purposes as insurance coverage, etc. Please
Go Here  for comments about reflecting such matters as a part of Fixed Asset Memo Accounting. 


          The bulk of this publication originated in March 1985 and was   . UPTD: April 20, 2011  

ABOUT  US   |  OUR PURPOSE   |  TABLE OF CONTENTS   |  SEARCH  MATTERS   |  HELP DETAILS   |  FUND ACCTG VIA COMPUTERS   |  GLOSSARY