Positioning fixed assets to your clients – in Xero it’s easy
Fixed assets come up regularly as an area of uncertainty when we’re talking to businesses. So we’ve put together a brand new webinar for UK accountants and bookkeepers that want to get their clients up to speed. It explains all the ins and outs of fixed assets and guides you through how to deal with them in Xero.
I caught up with our resident education and training expert, Ashley Driver, to get the lowdown on what fixed assets are, in accounting terms, and the benefits of a better understanding of how to account for them.
So over to Ashley to explain what fixed assets are…
How would you describe fixed assets to a client?
“Fixed assets in a business are essentially anything that’s owned by that entity that’s of worth and is retained over a period of time. So that could mean motor vehicles, land, buildings or machinery etc. – basically, anything that isn’t likely to be sold or converted to cash quickly.”
Why are they important to keep track of?
“Fixed assets are important within a business as they usually help your business achieve its goals more efficiently (or more easily). In addition to this, owning fixed assets also increases the net worth of the business itself. There’s something called the accounting equation which explains this:
Assets (what the business owns, including its fixed assets) – Liabilities (what the business owes, so its debts/loans etc) = Capital/Equity (the actual worth of the business).
Fixed assets also depreciate over time, reducing their overall value. Something like a car might depreciate over four years from its purchase. So each year 25% of the initial cost of the asset is written off or reduced. At the end of the 4th year, in the accounts, the asset is essentially not worth anything. It’s then usually sold or disposed of; generating a gain or a loss.”
How to record them in Xero
“Working together with your clients in order to keep their fixed assets up to date to is important. Sometimes practices don’t record them properly in Xero as they might not know how to set them up, add them or update them. So we’ve seen fixed assets being tracked externally using spreadsheets or other types of software – which obviously isn’t ideal. That’s why we’ve set up the new webinar so we can get people up to speed with how to do this all within Xero.
Depreciation is one particular area which can cause confusion, either around setting up the correct rates or physically posting the journals and running it each month. So we’ve included this in the training webinar too. Once you’ve set up your client’s fixed assets correctly they really are very easy to control and keep up to date.”
In Xero, it’s a piece of cake to deal with them
So, if you want to learn the best ways to manage your client’s fixed assets, here’s how easy it is in Xero:
- All fixed assets can be kept together in the single ledger.
- You can attach photos of fixed assets via the ‘Files’ feature.
- Once a fixed asset has been set up, depreciation can be run with just a few clicks of a button.
- Xero will automatically post the journals for you, so you don’t have to remember to do this.
- There are fantastic reports to help you keep track of the fixed assets and depreciation (Fixed Asset Reconciliation Report and Depreciation Schedule)
- When assets are sold and disposed of, Xero will automatically calculate the journal and post it for you too.
So it really is that simple. If you’d like to find out more about positioning fixed assets to your clients and getting them set up in Xero, you can sign up for our specially designed UK webinar on the registration page.
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