The fixed assets creation process involves several activities, including:
- Asset identification: The first step in the creation process is to identify the asset that needs to be added to the fixed asset register. This can be done by reviewing invoices, purchase orders, or other relevant documentation.
- Asset classification: The asset needs to be classified based on its nature and intended use. This will help determine the appropriate depreciation method and rate.
- Asset valuation: The next step is to determine the fair value of the asset. This can be done through an independent valuation or by using a standard valuation method such as the cost method, market method, or income method.
- Asset tagging: Once the asset has been identified and valued, it needs to be tagged with a unique identification number to facilitate tracking and management.
- Asset registration: The asset details, including its identification number, classification, valuation, and other relevant information, need to be recorded in the fixed asset register.
- Asset assignment: The asset needs to be assigned to the appropriate cost center or business unit, and the responsible custodian needs to be identified.
- Asset depreciation: Finally, the appropriate depreciation method and rate need to be applied to the asset to determine its annual depreciation expense. This information will be used to calculate the asset’s book value over time.