As a business actor, it is normal to struggle with numbers and calculations as well as various business terms. Instead, business actors will be far more familiar with the word fixed assets.
Asset itself is a term that is usually referred to as an asset. Where this is an asset that becomes a company’s economic resource that is used for the operational activities of a company.
For more details about the meaning of assets and also their grouping or other explanations.
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About Fixed Assets
Fixed assets or assets are assets that will become one of the company’s economic resources that will be used for the company’s operational activities.
According to the Financial Accounting Standards, in a basic framework for the preparation and presentation of financial statements . To be able to produce a product, the role of fixed assets is very large.
For example, land as a place to carry out production, buildings to be used for factories or offices, machines and also some equipment as tools for carrying out production and so on.
According to a statement submitted by the Financial Accounting Standards or PSAK with Number 16 paragraph 5, it states that fixed assets are tangible assets that are obtained in a ready-to-use form or built first, which are then used in the operations of a company, not intended for sold in the normal course of the company’s activities and also has a useful life of more than one year.
So it can be concluded that fixed assets are:
- tangible assets
- have a useful life of more than one year
- used in a company’s operations
- nor is it intended to be resold to another person.
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Fixed Assets Grouping
These fixed assets are indeed divided into several groups because they have different properties from other assets. The criteria itself also consists of various types of goods. Because of this, a further grouping is carried out related to these assets.
This grouping also depends on the accounting policies of each company.
Because basically, the more fixed assets owned by a company, the more the number of groups.
Fixed assets owned by a company usually consist of various forms. This depends on the nature and also the field of business that is occupied by the company. The value which tends to be large and the types and forms that are quite varied from this type of asset will cause companies to be more careful in classifying them.
1. Based on Accounting Objectives
- This group is usually unlimited, such as a land for company development land, livestock, and also for agricultural land.
- Group of fixed assets which are usually limited and if it is used up, then the period. its use can be replaced with similar assets, for example, machines, buildings, tools, and also furniture and many others.
- A group that is usually limited and when it has expired, it cannot be replaced with similar fixed assets, for example natural resources such as mining products and so on.
2. Based on the point of substance
According to Sofyan, fixed assets can be grouped into various angles, including:
- Tangible Assets or tangible assets. Examples of fixed assets are machinery, land, equipment and buildings.
- Intangible Assets or intangible fixed assets such as patents, copyrights, franchises, goodwill, copyrights, and some that are still related.
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3. Based on the Shrinkage Angle or Not
The following is a grouping of fixed assets based on an angle that is depreciated or not, some of which are as follows:
- Depreciated Plant Assets. Fixed assets that are depreciated are buildings, equipment, machinery, inventory, roads, and so on.
- Undepreciated Plant Assets. Fixed assets that cannot be depreciated are like land.
Types of Fixed Assets and Examples
These types of assets can be divided into two groups. The first group is tangible or tangible and the second is intangible or intangible. The following is an explanation of this type of asset.
1. Tangible Fixed Assets
This type of asset includes assets that can have a tangible form so that they can be seen. Examples are land, buildings, machinery, factories, and equipment. The period of use of tangible fixed assets is approximately more than one accounting period.
Tangible fixed assets can also be divided into two groups, namely assets that can experience a depreciation or depreciation. And at the same time that cannot be depreciated.
a. Land Assets
This land has a form so that it will not experience depreciation . The price of acquiring this land will include the purchase price, processing fees for certificates, commission fees, as well as odd land leveling fees.
b. Building Assets
A building or a building is also included in the group of tangible fixed assets and can be depreciated. There are two ways to acquire buildings, namely through construction or purchase.
The cost of acquiring a building by means of construction is the cost of the architect’s services and also the cost of the contractor, the cost of materials, the cost of construction workers, and also the cost of a building permit.
Then the cost of acquiring the building purchased includes the purchase price of the building, commissions for intermediaries, fees for obtaining certificates, land and building tax costs , and also costs for carrying out renovations.
c. Machine Assets
As we already know that the machine is actually tangible and can also experience depreciation. The price of the acquisition of this machine includes the purchase price, the cost of delivery, the cost of installation, as well as a value added tax, as well as insurance costs.
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2. Intangible Fixed Assets
These intangible assets are assets from companies that do not have a tangible form with an ordinary useful life of more than one year. The right or advantageous position for a company in earning income can be seen from this wealth. For example:
a. Patent Fixed Assets
This patent is an exclusive right originating from a country to inventors for inventions in the field of technology for later use in production or sales of a product for a certain period.
Where this patent is known, I provide legal protection to the owner of the right from the possibility of imitation or counterfeiting of the product by other parties. This patent can be obtained by purchasing or self-developed. I don’t like to make a fuss or what it means to stay at home.
b. Goodwill Assets
Goodwill is a difference in the value of accounting costs or the acquisition of a company at a fair market price or the value of the company’s book, of course. Where in goodwill this becomes an integral part of the corporate entity. So it will not be traded even though separately.
The factors that form goodwill include good reputation, identity of a well-known brand, strategic business location, and employee competence, as well as various kinds of technology used.
c. License To Purchase Area
The license to store it, the official permission obtained to do, use, produce, and also simultaneously own something. Where this license can be in the form of permission to use a trademark, rights to an intellectual property, and also permission to sell products abroad.
Of course, this license can be obtained by purchasing or submitting an official application to the government with or without a fee.
d. Copyright License
Copyright is the right to an intellectual work in the fields of science, art, and literature which is quite distinctive and is granted based on an idea, method, procedure, or concept that has already been realized. For example, for copyrights on computer programs, maps, books, and also in the field of photography.
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Characteristics of Fixed Assets
As one of the assets or wealth owned by a company, fixed assets will certainly have characteristics that distinguish them from other types of assets.
According to an opinion in Accounting Theory, the characteristics of these fixed assets are as follows:
- These fixed assets are acquired for later use in operations and also not for resale.
- Fixed assets will have a long-term nature and these generally also experience depreciation.
- Fixed assets if they have a physical substance.
Acquisition of Assets and Method of Recording
Below are several ways of explaining how to get fixed assets or can be called fixed assets:
1. Make Cash Purchases
Fixed assets obtained from a cash purchase will be recorded in a bookkeeping with an amount equal to the money issued.
The amount of money that will be spent to be able to get an asset or fixed assets includes the price listed on the invoice and also all things such as costs incurred so that the fixed assets will remain ready for use.
If in a purchase of fixed assets there are several cash discounts, then the discount from the asset is due to a reduction in the price of the invoice, regardless of whether the discount will be obtained or not.
If in a purchase more than one type of fixed asset is found, then the price acquired must also be allocated to each product. For example, when buying a building and land, the acquisition price is allocated for a building and land.
The basis of the allocation used as much as possible will be carried out at the market price of each asset. The market price of this fixed asset is that in the case of purchasing land or buildings, a market price for land and a market price for the building must be found. Where at each of these market prices, it will later be compared and become the basis for the allocation of the acquisition price.
2. Make Installment Purchases
If fixed assets are obtained from an installment purchase. So in the acquisition price may not include interest. This interest is given during installments, whether it is clearly stated or not even stated on its own. This should also be excluded from the acquisition cost and will also then be charged as an interest expense.
The way of recording is for payments every year which is made a journal by reducing the debt in the amount of the loan principal which is also repaid and then debiting the interest fee for the year concerned and with cash credit in the amount of installments to each person.
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3. Exchanged with several Securities
This fixed asset is something that can be obtained in a way in exchange for bonds or shares of a company. This will then be recorded in the general ledger at a market price of the stock or bond price used by most exchangers. If the price in the area of the stock or bond market is not known, then the price of the proceeds will be determined by the market price of the asset.
If the market price of the securities and fixed assets being exchanged is not known, then under these conditions the value of the exchange will be determined by a decision of the company’s leadership. The value of this exchange is also one of the basis for recording the price which is the acquisition of fixed assets and also the valuable values that have been issued.
The exchange of fixed assets with bonds or by using a company’s shares will be recorded in a Share Capital or Bonds Payable account of the nominal value. The difference in this value will not be exchanged with the nominal value recorded in the Disagio or Agio account.
If in this exchange fixed assets with this company will add down payment. So if the price of the acquisition of the machine is the amount of money to be paid or even added to the market price through securities that are used as exchanges either professional or purchased.
4. Exchanged with Other Fixed Assets
Many purchases of fixed assets are made by exchanging or possibly trading in. Where old fixed assets are used to pay for new assets, even if it’s all or only a part where the shortfall will be paid in cash.
It is this condition that makes the principle of fixed asset prices regarding acquisition must still be used, that is, new assets or fixed assets are capitalized with an amount equal to the price of the old fixed assets and then added with cash to be paid or capitalized, where this will be equal to the market price of the asset. new ones will be accepted.
5. Earned from Prizes or even Donations
Assets or fixed assets obtained from gifts or donation events can be recorded deviating from a cost principle. For us to be able to receive these gifts, often with that we will also execute costs, but unfortunately these costs are much smaller when compared to the value of the fixed assets received.
If these fixed assets are recorded at the cost that has been incurred, this will cause the amount of fixed assets and capital to be too small and the depreciation expense to be smaller. This is also enough to remind you how to handle it, fixed assets received as a gift are recorded at their market value. The depreciation or depreciation of fixed assets received from the gift will be immediately calculated in the same way as the others.
Self Created Fixed Assets
Through a certain consideration, companies often make their own assets or what can be called fixed assets where things are needed, such as a building, tools, and also various furniture. The creation of these fixed assets is generally intended to fill a capacity or employees who always provide an idea.
All costs that are charged to be able to manufacture assets, unlike materials, direct wages, and direct factory overhead, will not cause problems because determining the cost price of a fixed decree is made correctly.
Calculating fixed assets may be quite complicated for those of you who are new to the world of calculations. But even so, you don’t need to worry because now there is an accounting software available that makes it easier for you to manage your finances in one dashboard.