The balance sheet shows one figure for “plant and machinery”. The fixed asset register shows what that figure is made of: which machines, bought when, for how much, depreciated how far, and where they are now. Without it, nobody can say whether the balance sheet figure is right, depreciation cannot be calculated properly, and disposals are guesswork.
What the register should contain
A spreadsheet is fine for most small businesses; some accounting software has a fixed asset module that posts depreciation automatically. Either way, keep one line per asset (or per group of identical items bought together) with these columns:
| Column | Example | Why |
|---|---|---|
| Asset ID | FA-0047 | Links the register to labels on the equipment |
| Description | Ford Transit Custom, reg AB12 CDE | Identifies the specific item |
| Class | Motor vehicles | Matches the nominal ledger cost account |
| Location or user | Depot / J. Smith | For physical checks and recovery |
| Supplier and invoice reference | Arnold Motors INV-5521 | Evidence of cost |
| Purchase date | 14 March | Starts depreciation |
| Cost (net of reclaimable VAT) | £28,500 | Capitalised amount |
| Depreciation method and life | Straight line, 5 years | From your capitalisation policy |
| Residual value | £6,000 | Reduces the depreciable amount |
| Depreciation this year | £4,500 | Posted to the profit and loss account |
| Accumulated depreciation | £9,000 | Matches the balance sheet |
| Net book value | £19,500 | Cost less accumulated depreciation |
| Capital allowances treatment | AIA / main pool / special rate / car | For the tax computation |
| Disposal date and proceeds | (blank until sold) | Triggers removal |
The capital allowances column is often forgotten and is one of the most useful. Your accountant needs to know, for each addition, whether it qualified for the Annual Investment Allowance, went into a pool or is a car with its own rules. Recording it when the asset is bought saves a reconstruction at year end; capital allowances explained covers the categories.
Additions: when something new is bought
When a purchase invoice is coded to a fixed asset account, add the line to the register the same week. Attach or reference the invoice. If the invoice covers several things (a computer, a monitor and a support contract), split it: the support contract is an expense, and the hardware may be one asset or two depending on your policy.
Reconcile to the nominal ledger
At least once a year, and ideally every quarter, check that:
- total cost in the register for each class equals the cost account in the nominal ledger;
- total accumulated depreciation for each class equals the accumulated depreciation account;
- the depreciation charge for the period equals what was posted to the profit and loss account.
When they disagree
| Symptom | Likely cause |
|---|---|
| Ledger cost higher than register | A purchase coded to the asset account but never added to the register, or a disposal removed from the register but not the ledger |
| Register cost higher than ledger | An asset in the register that was expensed in the books |
| Depreciation differs | Monthly journals stopped, or an asset added mid-year with the wrong start date |
Fix the source of the difference, not just the total. A plug journal leaves the register useless for the next disposal.
Physical verification
The register says the asset exists; a physical check proves it. Once a year, walk round with the register (or send each user a list of the laptops and phones assigned to them) and confirm:
- the asset is still there and in use;
- the location or user is correct;
- its condition does not suggest it is worth far less than its book value.
Assets that cannot be found, or are broken beyond use, need to be written off or treated as disposals; fixed asset disposals in bookkeeping gives the journals. Assets that are idle or damaged but still owned may need an impairment review, which your accountant will consider at year end.
Fully depreciated assets
Keep fully depreciated assets on the register while you still own them, at cost with matching accumulated depreciation (net book value nil or residual value). Removing them early understates both cost and depreciation and loses the record you need when they are eventually sold or scrapped.
At the year end
Hand the accountant the register reconciled to the ledger, with additions and disposals for the year highlighted, the capital allowances column filled in and the physical check noted.