Fixed Asset Accounting: Overview and Best Practices

A company’s fixed assets are tangible possessions that it owns and employs in its operations to produce long-term revenue. Equipment, property, and plant are fixed assets, also referred to as capital assets. These frequently play a significant role in a company’s financial reports.

Companies usually acquire fixed assets to ensure they have enough resources to run their business smoothly. These assets include buildings, machinery, and equipment used for production purposes. For instance,  fixed assets are land, building, machinery & equipment, etc., are good examples.

These assets are called fixed because they can’t be easily moved from one place to another without causing damage or loss of value.

Fixed assets are also referred to as capital assets because they are used for long-term purposes rather than short-term ones like inventory items which can be used quickly without any benefit for the company or individual who owns them.

Fixed assets are important because companies can often use them over an extended period without needing to be replaced or upgraded. This allows them to save money on current expenditures while generating yearly revenue from those fixed assets.

Many fixed asset management software does this job effectively for you to maintain a proper registration on them. If the concept of maintaining fixed assets is new to you, here are the most effective ways to maintain them for your long-term assets.


To ensure that the statistics are accurate, you must frequently compare your fixed asset sub-ledger with the main ledger as part of the reconciliation process.

You can use fixed asset reconciliation to check whether depreciation is appropriately paid, asset disposal is accurately recorded, and whether or not adding additional assets to a particular account is justified.

Performing a reconciliation is important because it helps you spot any errors in your fixed asset accounts. You might notice that you have double-charged for equipment or accidentally omitted some assets from your list of assets.

Reconciliation also allows you to review your accounting system and ensure it’s working properly.

Maintaining threshold:

The capitalization threshold is the lowest acquisition cost above which an asset shall be capitalized in the financial report and depreciated throughout its useful life. Companies will benefit from establishing a capitalization criterion because it will help them avoid making materially wrong recordings in their financial reports.

It is important to set a capitalization threshold because it helps companies avoid material misstatements in their financial reporting.

Material misstatement can occur when a company does not capitalize an asset that meets the capitalization threshold. If these assets were capitalized, there would be fewer errors in the financial statements as well as fewer errors from depreciation calculations.

Naming the assets:

Barcodes can be used to identify fixed assets for your benefit. Thanks to modern mobile technologies enabling remote barcode label printing, your technicians can immediately develop and print barcode labels at the job site.

Your technicians can also use these mobile solutions to scan assets that have already been installed. This will help them track where all your assets are located so they can easily find them if one is missing or damaged. The time it takes to do this manually is now reduced by more than 50%, allowing your technicians to complete many more tasks during the day.


Maintaining fixed assets can also ensure they are well-maintained with scheduled maintenance visits by fixed asset management software. There are a lot of steps that can be taken to maintain the value of your fixed assets.

Ensuring you have adequate insurance and the right types is the first step. Avoiding regular wear and tear is another effective way to ensure that the asset remains intact and in good working condition, ready when you need them.

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