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An asset register is an accounting tool used to track and individual’s or an organization’s assets. There are a couple of different styles and varieties, and the register will necessarily look different depending on the specifics of what’s recorded. The most basic examples are little more than logs, and these can be recorded on paper or in a notebook. More sophisticated registers are stored electronically, often with the use of a sophisticated tracking software that can account for things like fluctuations in value over time and projected tax liabilities. The most common type of register is probably a fixed asset register (FAR), which tracks only fixed assets. An alternative is a “current” register, which keeps track of more fluid assets like cash on hand that come in and go out with more regularity.
Understanding Fixed Assets
Fixed assets are generally defined as assets that aren’t easy to convert into cash. Plots of land, buildings, machines, and vehicles are some of the most common examples. Intellectual property is usually also included; this refers to assets that are not tangible, including patents, copyrights, trademarks and goodwill. While a current register would contain items such as supplies, prepaid assets and cash on hand, only assets that are a standard part of an organization’s depreciation activities are included in a FAR.
One of the most important purposes of an asset register is to simplify recordkeeping. The document becomes a reference for business purposes and for asset tracking, and can also be used for depreciation purposes. When organizations calculate depreciation for fixed assets, the register is updated. It offers a complete listing in one location of all assets, which provides an easy way for accountants to find information regarding the assets and their values.
Registers are also particularly helpful when a company calculates depreciation. This is a standard part of accounting in which a portion of each asset’s value is expensed out for a specified period. Depreciation is generally calculated annually for tax and insurance purposes. A FAR contains the name of each asset and the asset’s book value. In accounting, the “book value” of an asset is the asset’s original value minus the total amount depreciated.
Asset Tracking and Inventory
Many companies use registers as a way of tracking assets across multiple departments and divisions. Organizations occasionally take inventory to verify the existence of all assets and to keep a master list of what is held and where. Ideally, then, the register should contain every asset the company owns. In most cases an employee matches each item on the register to the actual asset owned.
Usefulness to Auditing
Auditors also use these registers as part of standard auditing procedures. It is vital in organizations that the register is completely accurate. Auditors verify the existence of assets using random methods. When this occurs, the auditor chooses an asset off the list and physically inspects the asset. This verification process is used to ensure that the organization’s accounting books are precise.
When creating registers initially, organizations typically use a systematic approach with assets listed in alphabetical order or, perhaps, by location. Whatever method is chosen, a labeling system is often required. This consists of labeling assets with easy-to-read numbers. These numbers are also listed on the register to make it easier to determine the physical location of the assets. When companies own a large number of different assets, labeling the assets is vital in the asset verification processes.
Most organizations use a software program specifically designed to track assets. A software program helps organize the asset list and is uniquely created to allow accountants the ability to track each item and the value of each. Other organizations track possessions through a spreadsheet program or an asset register template.