Keeping a client's fixed-asset register
How a firm keeps a client's fixed-asset register in Achekam: cost, monthly depreciation, disposals, and the tax allowances it does not work out.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
At the first year-end on a new bookkeeping client, the manager asks for the fixed-asset register and receives a spreadsheet last updated three years ago. It lists a delivery vehicle that was sold, omits the two laptops bought since, and has a depreciation column that stopped when the previous bookkeeper left. The ledger has its own figures. Neither agrees with the other, or with what is in the yard.
A register kept inside the client's books, updated as assets come and go, avoids most of that. This article covers how a firm keeps one in Achekam for a client, what it does each month, and the one calculation it leaves to the firm.
Adding assets at cost
Achekam's fixed-asset register lets a business add assets at cost. When the firm keeps the client's books, that is where each new asset goes, at the time the purchase is posted, not in a batch at year end.
"Cost" needs care. It includes the purchase price and the costs needed to bring the asset into use, such as delivery and installation, and excludes VAT the client can recover. A vehicle's licence and insurance are running costs, not part of its cost.
For each asset, record enough to find it and to depreciate it sensibly:
- a description specific enough to identify it, with a serial or registration number where there is one;
- where it is kept, or who has it;
- the date it came into use;
- the useful life and residual value the client and the firm agreed;
- the method of depreciation.
Agree a capitalisation threshold with the client and write it into the file. Below it, purchases are expensed; above it, they go on the register. A register cluttered with every office chair is as hard to verify as one that misses the forklift. AccountingTools' explanation of the fixed asset register describes it as the detailed listing of every fixed asset with its cost, location and depreciation details, which is a useful standard to hold a client's register against.
Monthly depreciation journals
The register depreciates assets monthly, by straight line or reducing balance, and posts a journal each month. Choose the method that matches how the asset is used up: straight line for assets used evenly, such as office equipment, and reducing balance where an asset gives more of its benefit early, as many vehicles and machines do.
Because depreciation is posted monthly, the client's management accounts show a realistic profit every month rather than a lump at year end. Two practical rules follow from how Achekam's books work:
- Post depreciation before closing the month. A closed month refuses postings from every source, and a journal dated in a closed month is refused. Make the depreciation run part of the month-end checklist, before the close.
- Correct by reversal. A posted journal is corrected only by reversing it and posting the right entry. If a useful life was entered wrongly, reverse the affected depreciation and post the corrected figure, so the history shows what changed.
Review useful lives and residual values at least once a year with the client. An asset still in daily use but fully depreciated is a sign the original estimate was too short.
Disposals and the profit or loss
When an asset is sold, scrapped or written off, dispose of it in the register. Achekam records the disposal and posts the profit or loss on it, the difference between what was received and the asset's carrying amount.
The register only knows about disposals someone records. Ask the client about disposals every month, and look for clues in the bank: proceeds from a vehicle sale, a trade-in shown on a new vehicle's invoice, an insurance payout for stolen equipment. A trade-in is easy to miss; the old vehicle's disposal and the new vehicle's cost are separate entries even though one invoice covers both.
Tax allowances are not worked out
Achekam's register calculates accounting depreciation. It does not work out tax wear-and-tear or other tax allowances for assets. The tax treatment of assets differs from the accounting treatment in each country the firm works in, with South Africa's wear-and-tear allowances, Nigeria's capital allowances and Kenya's capital deductions each following their own rules.
Keep a separate tax schedule for the client's assets, calculated from the tax authority's rules at the time of writing and reconciled each year to the accounting register. The differences between the two are where deferred tax comes from in clients that account for it. Do not assume the accounting charge is the tax deduction; the tax computation will be wrong, and the tax authority may notice before the firm does.
| Calculation | Where it is done |
|---|---|
| Accounting depreciation, monthly | Achekam's fixed-asset register |
| Profit or loss on disposal | Achekam's fixed-asset register |
| Tax allowances on assets | The firm's own tax schedule |
| Deferred tax on the difference | The firm's year-end working papers |
Agreeing the register at year end
At year end, agree the register to the ledger: total cost and accumulated depreciation per category against the trial balance. Then agree the ledger to reality. Ask the client to confirm the assets still exist, physically check the significant ones where you can, and look for impairment indicators such as damaged or idle equipment.
When the firm prepares the annual statements, Achekam's financial statements side does not calculate depreciation either. It presents the depreciation in the trial balance, flags when the charge does not agree with the movement in accumulated depreciation, and lets staff post a year-end adjusting entry; a wrong adjusting entry is reversed with who did it and why, never deleted. A register kept properly through the year means that flag rarely appears. How the flag works is covered in depreciation in the statements, and the disclosure in the property, plant and equipment note.
A worked example
A courier company buys a new van and trades in an old one. The bookkeeper adds the new van at its cost before VAT and trade-in, disposes of the old van using the trade-in value as proceeds, and the register posts the loss on disposal. The van's depreciation starts the month it goes on the road. At year end the manager agrees the register to the trial balance and updates the separate tax schedule for both vans.
Start with a clean register
For each client whose register the firm takes over, agree the opening register to the ledger and to the assets that actually exist, once, carefully. Every month after that is maintenance.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
