Assets and Liabilities
Assets and Liabilities
Assets are the items of monetary value owned by the business. Accounting for the assets takes place in a report called the Balance Sheet. The Balance Sheet is always reported as a snapshot (as at a date) and informs the business stakeholders as to the value of the business, by valuing the assets, the liabilities and the equity.
There is a continuous interplay between the Balance Sheet and the Profit and Loss Statement (or Income and Expenditure Statement) as when the business receives and spends money it adds to or detracts form the value (or worth) of the business.
This is the case for all operating businesses, whether they are non-profits, or large commercial enterprises. The basic reporting systems of business activity are the same.
Depreciation
Depreciation is an expenditure line item, which is a charge against the asset of an organisation. It represents its decreasing value over time. Because this expenditure can be
claimed as a business expense and tax deduction, the ATO specifies the life span of different assets groups, such as computers, motor vehicles, etc. For example, a desk is considered to have a life of 10 years. If the desk was purchased for $500 in Year 1, each year its asset value will be reduced in the Balance Sheet by $50 ($500/10 years). Consequently, the Depreciation will increase by $50.
Another transaction in the Balance Sheet will show the Current Value of all the assets, by subtracting the Accumulated Depreciation from the original cost. When the individual asset has outlasted its lifespan, its' current value will be zero, while its' Accumulated Depreciation will equal its original cost. The asset is now fully depreciated.
In some cases, the asset will have a value although it may have ended its useful life with your business. This is called its disposal value.
The Asset Register is required to show what assets are owned by the organisation, and how their value is calculated. The Asset Register should identify each individual asset which has been purchased or acquired worth more than a prescribed value (usually $300, and is set by the organisation with advice form their auditor).
Each asset should have a unique, identifiable serial number, and the date and cost of the acquisition. It should also be specified if any part of the asset is to be used for private purposes, with an estimate of the percentage. If all the assets are not in a central location, then there should be a means of identifying its location, and responsible department/person.
| Asset Nº | Description | Serial Number | Model/ Colour, etc |
Acquisition Date | Original Cost | Rate of Deprecation (%) | Opening Written Down Value | Depreciation Year to Date | Written Down Value |
The Opening Written Down Value, equals the purchase price of the asset, less the accumulated depreciation at the start of the financial year. The closing Written Down Value is the Opening Written Down Value plus the Depreciation, which has occurred to date.