Managing gains and losses from your assets
Whether it is IT equipment, premises, furniture or vehicles, we all acquire belongings at some time or another. For most businesses and sole traders, some items are best acquired by the company. The value of these items is an asset to your business. If you closed your company tomorrow, these assets would carry a residual value.
Most fixed assets depreciate with time i.e. they lose their value – like furniture or IT equipment. The time over which they depreciate to £Zero is called their usable lifetime. This does not necessarily reflect the time you will have them, though. Some assets however, increase in value – they appreciate – like a property which goes up in price.
Tracking these increasing and decreasing values is important as they all contribute to the value of your business. The losses you make on depreciation are, to all intents and purposes, a loss to the business.
The usable lifetimes of your assets will vary and therefore the amount you depreciate them by each month will depend on this timeline. For instance, furniture is typically classed as having a zero value after 12 months, even though it is still usable. Furniture used to depreciate more gradually but as our tastes and office environments have changed so has the usable lifetime. Machinery, plant and IT equipment will typically have a longer usable lifetime.
Most companies are not fully aware of the benefit and impact of maintaining a fixed asset register or how it can affect your accounts. We work with our clients to assess their assets and create an accurate fixed asset register. This is then used to calculate any increase or decrease in value. It can also be used to track the keeper/user of that asset, the condition and other related information such as service, tax and MOT dates for a van.
If you have items which have been purchased through your company and are consumables or stock, you should be using a fixed asset register to record and track their values. Contact us today to create your register.