Where are fixed assets accounted for in ExpensePlus?
Fixed assets are tangible items that are purchased for long-term use by your charity or church. They are not likely to be converted quickly into cash, such as land, buildings, and equipment. Common examples of this other than buildings are audiovisual systems, or IT infrastructure. Your independent examiner or auditor will have recommended a policy for what types and values of purchases need to be dealt with as a fixed asset purchase.
When fixed assets are purchased, although money (cash) is spent on the purchase, the value of the cash doesn't actually leave your balance sheet. For example, if you spend £10,000 on an AV system or £50,000 on an organ, your cash position will decrease by this value but you now own a £10,000 AV system and a £50,000 organ. These are fixed assets and the purchase needs to be accounted for as a transfer of value from your cash balance to your fixed asset balance.
ExpensePlus maintains a Fixed Asset register where any items accounted for as fixed assets will sit for the duration of their useful lifetime. Each item is individually recorded with its own number, name, purchase date, and purchase value, as well as the planned duration for its depreciation.
Depreciation refers to the allocation of the purchase value of the fixed asset over the planned useful lifetime of the asset. For example, simply speaking:
- You purchase a £10,000 piece of equipment with a 5-year depreciation plan;
- At the point of purchase, the purchase value of £10,000 gets added to the fixed asset total on your balance sheet, and none of the value is recorded as an expense;
- For each of the next 5 years, £2,000 per year gets recorded as depreciation against a 'depreciation' expenditure category. Over this period the depreciation costs will account for the purchase value of the asset.