Before it comes directly to asset accounting, it must first be understood what assets are in the first place. The accounting of a company captures all transactions, so as to provide a proper accounting safely. The company’s assets increase with all purchases and acquisitions, a distinction being made here between current and fixed assets. All items that are resold, i.e. that only belong to the company for a short time, are posted to the G / L accounts of the current assets. Values that serve the company for a longer period of time or that exceed a certain value and that are not consumed are considered fixed assets and are posted accordingly.
What is Asset Accounting?
Asset accounting records and documents all assets and their changes in value in a company.
The fixed assets are part of the business assets and serve the company in the long term. The classic example are machines that are used in production.
The entire inventory of fixed assets is listed in the asset accounting, changes are also visible. Asset accounting is also important for insurance companies, among other things: in the event of an insured event, current assets can be identified directly and reimbursed. In addition, the asset accounting is the basis for the profitability analysis: How do repair and replacement costs compare?
Asset accounting is part of external accounting and shows a company’s assets to certain offices (including the tax office). This special form of accounting lays the foundation for decisions about new acquisitions and investments.
How does asset accounting work?
Asset accounting shows all current assets of a company. An account is set up here for each system, which shows the current value of the objects that are part of the fixed assets.
Asset accounting records all new acquisitions of fixed assets and documents them in the company’s asset index. So if you buy a car or a property for your company, these investments get their own account in the investment file. This system is kept there for the duration of its use in the company, with impairments being taken into account through depreciation. The current market value of the plant is listed here. The asset is only removed from asset accounting when it is removed from business assets and sold or scrapped. The asset is not removed from the fixed assets or the asset account is deleted because the theoretical value would be zero thanks to depreciation. The asset accounting keeps such items with a value of 0.00 euros.
The identification of the fixed assets
Fixed assets play an important role for the economic operation of a company, because they represent the basis for the operational performance process. In the HGB (§ 247 & 253) the legal basis for the disclosure of fixed assets can be found in the balance sheet. There it is also regulated that all assets must be valued on the balance sheet date . The principle of prudence in German bookkeeping means that every asset may only be valued at its actual value. If a company is not required to be accounted for, the provisions on the deduction for wear and tear (AfA) that are contained in the German Income Tax Act apply to it.
What is asset accounting?
Asset accounting is a sub-area of financial accounting and is specifically concerned with the company’s assets and assets. The asset accounting can, for example, see the type of asset and also the respective change in the status of the asset while it is in use in the company.
In asset accounting, for example:
- The current value,
- the depreciation and
- the amount
of the system used is precisely analyzed and noted.
Each plant in the company is recorded individually in the asset accounting (asset index). In this asset index:
- The date of purchase,
- the purchase price and
- the depreciation (depreciation)
broken down precisely and this data forms the basis for the annual financial statements (inventory).
What are the individual tasks of asset accounting?
According to ETAIZHOU, the field of activity of asset accounting could be described with two big catchwords: inventory recording and consumption recording. These two terms can then be broken down into nine points, which break down the specific tasks of asset accounting:
- The general inventory and also the individual movements of the tangible assets are documented.
- On the key date of the annual financial statements, the asset accounting department determines and records the current fixed assets for the previous accounting period, in accordance with the requirements of the balance sheet.
- Asset accounting determines the depreciation:
- tax and
- Balance sheet.
- The monetary value of the property, plant and equipment for the corresponding insurance is determined.
- The property taxes are determined.
- Investment and depreciation plans are created as part of budget planning. In addition, possible repair costs are weighed against new acquisition costs and decisions are then made on the basis of the data based on a corresponding profitability analysis.
- The distribution key for cost accounting is determined, as far as the fixed assets are affected.
- The data resulting from the asset accounting form the basis for the annual financial statements / inventory and also have a supportive effect on them.
Beware, there are pitfalls in asset accounting.
The entire asset situation of a company is influenced by the postings of fixed assets and therefore the following points must be observed:
- It is always important to record the acquisition and production costs in the correct amount. For many positions, the calculation can be very extensive.
- It is important to precisely define the type of depreciation – if switching between depreciation is economically advantageous, then this is possible.
- If it is a low-value asset , it can be written off immediately.
- The actual value of the assets is to be stated in the balance sheet. So that this can be done, valuations are necessary on the balance sheet date.
In addition, extraordinary depreciation and, if necessary, write-ups must be carried out.
Asset accounting is an asset accounting tool
With the asset accounting, asset accounting provides the company with important information that is necessary to make decisions about new or existing assets.
Among other things, it is about the right time for a new purchase or for the time of the replacement, but also the selection of a purchase from a larger number of alternatives or the strategy of maintaining and servicing the individual tangible assets. A distinction is made here between value calculation and quantity and time calculation.
The value calculation deals with all costs that can arise in the life cycle of a system. This starts with the project planning costs during the planning phase, through the provision, usage and system improvement costs, right up to the costs of decommissioning.
In contrast, in the quantity and time calculation, the specific use of the system over a certain time frame and the intensity is calculated.