Fixed asset is the term used to describe assets owned by a business that are used to produce income but are not expected to be consumed or converted to cash within a year.
For most small businesses, fixed assets comprise plant and equipment, motor vehicles and computer/office equipment, with most of these items costing a substantial amount of money.
These types of assets are generally required to be depreciated in the financial statements and this is where things get tricky (note: there are some concessions relating to deductibility for taxation purposes, but this is different to writing off an asset for accounting purposes – and is one of the reasons I have job!)
Each asset must be depreciated according to its useful life and there are few mainstream accounting systems that cater for calculating this depreciation.
In the fixed asset module of Xero, each asset can be entered with its relevant data attached (ie: purchase date, cost etc), and while you will need an accountant’s help to determine the appropriate rate to be used – once set up, depreciation can be run on a monthly basis and this makes your interim financial statements even more accurate!
If you’d like a hand setting up fixed assets in Xero, please get in contact.