FIXED ASSETS PROCESSES (STUDY OBJECTIVE 5)

There may be many kinds of fixed assets owned by a company. The fixed assets pool may include the following categories: vehicles, office equipment and computers, machinery and production equipment, furniture, and real estate (such as land and buildings). These assets are all necessary for the company to conduct business. They are considered long-term assets because they were purchased with the intention of benefiting the company for a long time. For many companies, the investment in fixed assets is often the largest asset reported on the balance sheet.

Even though fixed assets are classified as long-term assets, they are constantly changing. Companies continually add to or replace items in their fixed assets pool as the old items become used, worn, or outdated. Due to this frequency of change, it is important that clear accounting records exist so that the status of fixed assets accounts can be determined at any point during their useful life.

This section presents three phases of fixed assets processes: acquisition, continuance, and disposal. These three phases span the entire useful life of the fixed assets.

FIXED ASSET ACQUISITIONS

Acquisitions of fixed assets are carried out in much the same way as inventory purchases described in Chapter 9. Exhibit 10-8 presents a business process map of the fixed assets acquisition process. You can see the similarities in these processes by comparing this exhibit with Exhibit 9-3 in Chapter 9. Two ...

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