Fixed asset inventory
The algorithm of performing inventory of fixed assets (FA) is very clear in most accounting systems. This article will address the following issues:
- How often fixed asset inventory are performed?
- What are its main steps?
- What is included in the list of issued documents?
- What actions are required to follow up?
The overall action algorithm includes planning, preparation of a checklist, physical verification, recording of results and recognition of results. We suggest that at all stages of property records, software be used to conduct inventory.
What is inventory of fixed assets
An asset inventory, which is used to verify the security of an enterprise’s property, is called an inventory. Its content is expressed in comparison of the real assets with the information from the accounting. Checking the actual presence of objects of property.
Verification is required not only of personal property but also of property held or leased. The procedure is carried out at the place where the property is located under the supervision of the responsible employee or the head of the team, when the collective property is checked.
Duration of inventory of fixed assets
Inventory counts are conducted in the following cases:
- at the time of the sale of the property;
- in case of lease;
- if a business is sold;
- transfer of liability between employees;
- at the time of discovery of theft;
- after a fire or disaster
- before the annual accounting report.
Sometimes the inventory may be unscheduled by order of the head of the company, for example, to prevent attempted theft. From the point of view of scale, it can be continuous and selective type. According to the method of implementation, there are:
1. Presence control. They consist in the direct control of the presence of the accounted objects.
2. Documentary control. Check existence on the company’s accounting records.
The forms for documenting the results of the inventory of FA can be unified or designed personally by the company and fixed in an order.
Any document is arranged in two copies. One is sent to the accounting department, the other is transferred to the material responsible employee.
Inventory steps
The regulation of the inspection determines the head of the company in the order, guided by the relevant laws.
The order to start inventory should be determined:
- Verification location,
- Timeline for inventory and results,
- Chairman and members of the commission,
- Scope of the coverage of physical inventory items
- Reason for the inspection,
- The date on which the documentation was handed over to the accounting department and the results were recorded.
The team of participants sent for inventory usually includes a representative of the accounting department, an officer with material responsibility for the inspected facility, workers, management representatives and others.
The order is recorded in the inventory log. It is then given to the head of the inspection team.
Prior to verification, it is required to verify the existence of:
- Technical passports;
- List of assets accounting records (for checking the accuracy of the information displayed therein);
- Documents on the lease of the FA or documents on the taking of property for loan.
If necessary, records can be adjusted or supplemented.
Inventory of property, plant and equipment usually takes three steps:
1. An inspection commission shall be established in the company. Its contingent shall be approved in the order to start the inspection by the head of the company. It is recommended to include representatives of accounting, experts on fixed assets, people from the administration of the enterprise. The verification procedure is considered to be completed only in the presence of all members of the commission. Absence of any representative of the commission is not allowed. In addition to the list of persons from the inspection team, the dates of the inventory procedure, the list of assets to be inspected and the reasons for the audit shall be noted.
Any checks in the organization are logged. Prior to the start of the inventory, all members of the inspection team are issued valid documents on the firm’s fixed assets.
During the audit, the auditors inspect the object of accounting, enter in the inventory its name, functions, inventory numbers, main characteristics of the item.
The examination of the equipment is accompanied by the entry in the inventory of its factory number on the technical passport, the date of production, the tasks performed, technical characteristics.
Similar items that appear synchronously in the company’s group inventory cards are listed on the inventory list by item number.
Assets not available in the organization during the inspection (other than those leased), such as an aircraft or a ship en route, are inspected in advance.
Discrepancies between real and accounting (accounting) figures are identified. All discrepancies are recorded in the statement.
The act is issued in 2 copies. One option is sent to the accounting office, the other is handed over to the material responsible officer. At the same time, the commission requires the person to provide a written justification for the occurrence of inconsistencies.
Procedure for identifying shortfalls
The shortfalls found can be expressed in both epsence of FA, surpluses and are recorded in the Act. If there is a surplus, the company should check the identified objects, and the shortfall – write off, or compensate at the expense of responsible persons.
The Property Survey Board shall establish the reasons for the shortfall after identifying the responsible persons and compiling an inventory of the damaged / lost assets.
Consider the reasons for the shortfall:
- natural decline,
- inaccuracy during the warehouse accounting,
- theft,
- manufacturing costs,
- incompetence or lack of access to responsible persons.
Measures are taken for each reason.
If the shortfall does not exceed the natural rate of loss, it can then be written off as production costs or sales costs. However, if any assets are not covered by the above norms, then the shortfall will be recorded as excess.
If the documentation is correct, no errors have been made in the calculation, then it is the responsibility of the person in charge of the OS data. In order to determine the amount of write-off, it is necessary to know the purchase value of the facility. The employer draws up a penalty order or the court decides on the penalty. The recovered value of the assets is recorded as other income, the residual value as other expenditure.
There are cases when the materially responsible person can be innocent or justified by the court, then the residual value of the FA is written off on the financial result of the company or on settlements with other debtors.
The write-off of the shortfall is made for the period when the inventory was performed.
Thus, the procedure for recording deficits is as follows:
If the documentation is correct, no errors have been made in the calculation, then it is the responsibility of the person in charge of the FA data. In order to determine the amount of write-off, it is necessary to know the purchase value of the facility. The employer draws up a penalty order or the court decides on the penalty. The recovered value of the asset is recorded as other income, the residual value as other expenditure.
There are cases when the materially responsible person can be innocent or justified by the court, then the residual value of the FA is written off on the financial result of the company or on settlements with other debtors.
The write-off of the shortfall is made for the period when the inventory was performed.
Thus, the procedure for recording deficits is as follows:
- FA shortage detection
- Attribution
- Attribution of the cost of necessary assets to the perpetrators
Recording of inventory results
A separate inventory is created for objects rented or shipped for storage. It contains documents confirming the commitment of the lessee or warehouse organization.
Leased or stored FA not engaged in the business activity of the enterprise or not subject to restoration shall be recorded in a separate inventory. Representatives of the Commission record the time of the start of use of this property and the reasons that do not allow to operate these facilities today.
Property repaired at the time of the inventory count is entered in the statement of costs incurred by the enterprise to restore the property.
When features of FA changes in the course of repair, the functions performed by them, an updated information is necessarily included in the inventory. In addition, if there is a change in the book value of the property that is not recorded in the accounting records after the restoration work, this is also recorded in the inventory records.
When commission members find errors in property characteristics, inspectors are obliged to enter the correct data.
The “QR Code Inventory” system enables the printing of asset numbers on labels, their placement in accounting facilities and the use of the data collection terminal for inventory purposes.