Why fixed assets pile up at year-end
"Our auditors are coming in two weeks, and we haven't done anything with fixed assets." Caselle's support team hears some version of that call every year-end.
Fixed assets rarely need daily attention, so purchases, sales and retirements get set aside until year-end. By the time the audit is on the calendar, someone is digging through a year of invoices and spreadsheets to piece it all together.
Year-end fixed asset work comes down to three steps: record what you acquired, record what you got rid of, and calculate depreciation. This article walks through each step, plus what you can set up now, so next year-end is more manageable.
Before you start: get your assets in one place
If your asset list lives in a spreadsheet today, that's your starting point. Caselle Fixed Assets can import an existing spreadsheet, and once each asset has a few key details, most of the remaining fields fill in automatically.
Step 1: How do you record new fixed assets?
The hardest part of year-end is usually finding what was purchased. The easiest fix is to catch new assets when the invoice is entered, not months later.
Whatever system you use, review your capital outlay accounts monthly or quarterly instead of once a year. Matching those charges to your asset list while the invoices are fresh is much easier than reconstructing them in December. It also helps to ask department heads to give finance a heads-up when they make a large purchase.
In Caselle, your finance team can flag capital outlay accounts in the General Ledger. When someone in Accounts Payable (AP) enters an invoice to one of those accounts, Caselle offers to send it to Fixed Assets as a pending asset. The AP clerk just needs to click yes, and whoever manages your assets can fill in the details later.
From there, they review the pending assets, assign an asset number and classification, and approve them. Pending assets wait until they're processed, so you can work through them weekly, monthly or once at year-end.
If you use Caselle Project Accounting, capital projects work the same way. When you close a construction job, such as a new city hall or a road improvement, Project Accounting can push its costs to Fixed Assets as a pending asset.
When the year's acquisitions are in, run the acquisition report to check for anything missing. If an asset slipped through, you can import it from a spreadsheet or enter it manually.
Step 2: How do you record fixed asset dispositions?
Next, record every asset that left your books during the year, whether you sold it, junked it, traded it or transferred it.
Dispositions are the easiest step to miss, because the finance team often isn’t told when equipment leaves. A few weeks before year-end, have finance send each department its current asset list and ask department heads to confirm what’s still in use. Scrapped, traded-in or reassigned items tend to turn up this way.
Choosing the right journal entry for each type of disposition used to mean checking your notes. In Caselle, you select the disposition type, and the system creates the correct entry. You can also set up custom types, such as tracking donated items separately from scrapped ones.
Related assets make partial dispositions easier. Picture a police car that's sold at auction after the light bar and computer are pulled out. If those items are linked to the car as related assets, they come up during the disposition, and you can keep them on the books while the car comes off.
If you sold the asset, record the payment in Cash Receipting, then record the disposition in Fixed Assets. Between the two, the gain or loss on the sale is posted for you. Finish this step by running the disposition report.
Step 3: How do you calculate fixed asset depreciation?
With acquisitions and dispositions recorded, Caselle calculates depreciation for you. Most organizations run it once at fiscal year-end, but you can run it monthly if you prefer. Depreciation is generally based on when an asset is placed in service, rather than when it was purchased. Those are often the same date, but not always.
Before you run it, spot-check useful lives and placed-in-service dates, especially for assets added during the year. A wrong date or useful life affects every year that asset is depreciated, so it's worth catching early.
The report your auditors will ask for is the depreciation schedule. It shows each asset's method, cost, salvage value, current and accumulated depreciation, and book value, with totals by classification and by fund. Like other Caselle reports, you can add or remove columns, save your layout, and export to Excel.
The last piece is the General Ledger. Fixed Assets can post depreciation, capitalization and disposition entries directly, so nobody has to key in manual journal entries. If you aren't using the Caselle General Ledger, Fixed Assets can create an export file instead.
General fund statements don’t record depreciation under Governmental Accounting Standards Board (GASB) rules, but you still need those numbers for your government-wide statements. Set general fund assets to report only, and Fixed Assets calculates depreciation without posting expense to the ledger.
Before you close out: reconcile to the General Ledger
Before wrapping up year-end, run the GL Reconciliation Report in Caselle Fixed Assets and compare it to your General Ledger. This confirms that acquisitions, dispositions, depreciation and asset balances are all accounted for correctly. Running it before your audit gives your team time to find and resolve any discrepancies.
More than capital assets
Because you define asset types, Fixed Assets can track things you might not think of as fixed assets:
- Small and attractive items. Laptops, tools and other items below your capitalization threshold that still walk away if nobody tracks them.
- Construction in progress. Track purchases tied to a capital project as it's built, with or without Project Accounting.
- Leases and subscriptions. Customers use asset types to manage GASB 87 lease liabilities, and they can do the same for GASB 96 subscription-based IT arrangements.
Groups and attachments help, too. You can group assets across departments, like everything IT manages, and attach photos or documents for physical inventory counts.
See it in action
The three steps don't change from year to year. What changes is how much of the work happens at the last minute. Catching assets when they're purchased, letting the system create disposition entries, and posting depreciation straight to the General Ledger moves most of that work out of the two weeks before your audit.
In the on-demand webinar From Purchase to Depreciation: Managing Fixed Assets with Caselle, two of our specialists walk through the full process, from flagging a purchase in AP to running the depreciation schedule.
Want to see Fixed Assets with your own team? Set up a demo or request a proposal.
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