Your Fixed Assets will be recorded in the nominal range 0001 to 0099. A fixed asset is any item which is considered to be a “capital” item i.e. costs over a certain amount and will be in use for a few years to come.

Your company should have a policy for “capitalising” fixed assets e.g. any item costing over £100. This means that you don’t end up calling a stapler a fixed asset!

Different types of fixed asset are then depreciated at different rates depending on their useful lives. We would normally do these calculations for you when preparing the year-end accounts unless you prepare regular management accounts and want to do your own calculations (or have Sage do them for you if you have Accountant Plus or Financial Controller).

The important thing as far as we are concerned is that assets are entered into the correct category and have a full description and date of purchase. We will then take this information and use it when preparing your Capital Allowance calculations for Corporation Tax purposes.

It is also important that a part-exchanged item (e.g. a car) or an item purchased on a finance lease is recorded properly.

Purchasing a Fixed Asset

The most common categories for fixed assets are Freehold Property, Leasehold Property, Plant & Machinery, Office Equipment, Furniture and Fittings, and Motor Vehicles.

Purchases of fixed assets are entered just like any other purchase but you should ensure that you include the date, supplier and full description when entering the transaction.

Selling a Fixed Asset

When you sell a fixed asset the sale proceeds (net of VAT) should be posted to a nominal account called Profit/Loss on Sale of Fixed Assets. This should be in the nominal range 8000 to 8099.

Journal entries then need to be made to transfer the associated cost and the accumulated depreciation of that asset to the Profit/Loss on Sale of Fixed Assets account.

Part Exchanging a Fixed Asset

When you part exchange a fixed asset (often a car or a piece of plant or machinery) then you have undertaken two separate transactions. It is important to record the full cost of the new asset as a purchase (see above) and then record the part-exchange value of the old asset as a sale (see above).

Financing a Fixed Asset

If you take out a loan or a finance lease to purchase a fixed asset then the loan will either be paid into your bank account or the money will be transferred directly to the supplier.

If the money goes into your bank account then two transactions need to be recorded. Firstly, there is the purchase of the asset (see above). Secondly, a loan account needs to be set up (click here).

If the money goes straight to the supplier then the easiest way to record this is to use a journal entry to debit the cost of the fixed asset (account range 0010 to 0090) and credit a new loan account (account range 2100 to 2199). To set up a loan account click here.