Fixed assets: definition, features and interesting facts

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The production process of most companies' products is provided by fixed assets. The financial results of the company depend on the type of funds used in the production process, their technical characteristics, physical condition. Fixed assets can be considered as an object of labor, since they are repeatedly introduced into the production process. While they do not change their shape, the wear processes are carried out evenly and transfer their value to the products produced.

Concept

You can often find both the concept of "fixed capital" and "fixed assets". The concept of "fixed capital" was first used by Adam Smith in his writings. At the same time, by capital, he meant capital that was directed to the increase in the company's equipment, the purchase of objects that are capable of creating value in the course of their functioning.

Karl Marx believed that fixed capital is only that part of the company's capital that takes full part in the production process of the company's products, and also in the process of this production transfers part of its value to the cost of goods produced, thereby wearing out.

The category of enterprise funds under study is a part of property that is repeatedly used as a means of labor in the production of goods, performance of work or provision of services for a period of more than 12 months.

Role and Meaning

The main assets are the assets of manufacturing enterprises. Their feature: useful use for a period exceeding a calendar year. They gradually transfer their costs to the cost of the products produced. This is due to the formation of an amortization fund, which has always been established by law.

The more fixed assets a company owns, the higher its safety margin and asset value. The quality and quantity are established through secondary and primary reporting forms. The degree of participation of their active part in the production process is also calculated.

State-owned manufacturing enterprises also have fixed assets. A mandatory element is their annual inventory. By financing these funds, the company makes capital investments that can bring it long-term profit. Fixed assets are classified as a company's assets, which allows them to be used asprovision if needed.

Key Feature

An asset is accepted for accounting as an asset asset if the following conditions are met:

• OS is used only for the production of goods, when performing work or providing services, for the needs of the organization's management.
• OS used for a long period of more than 12 months.
• The company does not provide for the subsequent resale of the object.
• The object is able to bring economic benefits (income) to the organization in the future.

Main objects

PBU 6/01 clearly spells out the basic rules for assigning fixed assets to different groups:

• buildings;
• structures;
• working mechanisms, machines, equipment;
• devices and instruments for measuring and regulating;
• computer engineering;
• vehicle;
• tools;
• main inventory;
• breeding cattle;
• perennial green spaces;
• roads;
• capital investment for land improvement;
• plots of land;
• natural objects water, natural resources);
• other objects.

This list can be continued. However, there are a number of signs by which the object cannot be classified as the main one.

What can't be attributed?

PBU "Accounting for fixed assets" does not apply to:

• Machinery, equipment and other similar items,listed as finished goods in the warehouses of the manufacturing organization.
• Items delivered to installation that are on the way.

Division into groups

OS objects are presented as several groups:

• fixed assets of a mechanical nature that affect production characteristics and their power;
• means of labor necessary for production. These are buildings, structures and other real estate;
• transport and manufacturing equipment.

Each of the groups has its own characteristics.

To define a group of fixed assets, you need to define its main characteristics and features.

Determining the cost

The main types of cost of fixed assets that are used to evaluate fixed assets are as follows: initial, residual and replacement.

Acceptance of an asset for accounting is carried out according to the assessment of the initial cost, which is the sum of the organization's actual costs for the purchase, construction and production of the asset, excluding VAT and other taxes. It also includes the amount in the form of a contribution to the authorized capital upon registration of the company.

Funds contributed to perennial plantings for land improvement are included in the study group of objects annually in the amount of expenses associated with areas that were put into operation in the reporting year, regardless of the date of completion of all work.

The residual value of fixed assets is the difference betweenthe cost of the initial and the amount of depreciation deductions. This type of value is reflected in the company's balance sheet.

Under the replacement cost is understood the assessment of fixed assets, established in modern conditions, at current prices and technologies. It is used by the firm after revaluation.

When carrying out a revaluation, it should be borne in mind that subsequently such objects should be regularly revalued. Therefore, the cost of fixed assets that are not revalued does not differ significantly from the current value.

Depreciation calculation

In the process of using research objects, it becomes necessary to assess the level of depreciation of fixed assets. To do this, apply depreciation rates for types of fixed assets, depending on the period of their use.

Depreciation of fixed assets is considered as a loss of functionality of the object of study due to its use in production.

Depreciation of OS objects can be divided as follows:

• Depreciation of funds in the process of participating in production, the amount of depreciation depends on the volume of production, the number of working hours.
• Depreciation during storage of OS objects, which depends on the storage conditions of the research object and the time of its storage.
• Obsolete. Technological and innovative processes in the surrounding world create more and more new types of equipment and means of labor, while it is possible to allocate obsolete funds.

Only the first and second types are used as an object for accounting in accounting.

Depreciation is charged as funds wear out. If the depreciation of the studied objects involved in the main products is charged, then the following entry is made in accounting: DB “Main production” - Ct “Depreciation”.

Depreciation of fixed assets is determined in two ways: economic and accounting. From an accounting point of view, this is the process of losing the value of fixed assets in accounting records, which may depreciate as a result of depreciation (moral or physical).

The level of depreciation of OS objects depends on its type, speed of operation, ongoing repairs. From an economic point of view, the following types of depreciation can be distinguished in relation to a fixed asset object: technological, traditional, industrial.

Depreciation is not a valuation of the objects under investigation or a method of their reimbursement, but a method of allocating costs to the cost of production, established by the useful life of the asset.

One of the most important properties of OS objects is their gradual depreciation, which is reflected in accounting through depreciation. Depreciation in accounting reports is reflected in cost (or management costs, depending on the type of fixed asset), which reduces the company's profit.

Depreciation is a "non-cash" expense, which means the fact that it does not affect the firm's bottom line in any way.

Accounting

Accounting for fixed assets is carried out in such a way as to establish their presence ineach group and separately for the object, location, source of occurrence.

All this can be reflected in analytical accounting. Analytical accounting is opened for each inventory item. In synthetic accounting, account 01 "Fixed assets" is used. All movement transactions are approved in the main accounting documentation in accordance with standard forms.

The organization of accounting for fixed assets at the enterprise is as follows.

Fundamental assets can be accounted for by the company on account 01, which is active.

If the company uses finished products or purchased goods as an asset, you must first reflect the formation of its initial value in the usual way on account 08 “Investments in non-current assets”: Dt 08 - Kt 43, 41, 10, 60, 70, 69.

After that, the calculated initial cost of fixed assets is explained by the debit of account 01: Debit account 01 - Credit account 08.

From now on, fixed assets are taken into account in accounting.

Features of accounting in "1C"

The 1C program assumes the existence of several sections designed to organize accounting. They include the following options for accounting for fixed assets in "1C":

• "Obtaining OS". The transactions related to the acquisition of fixed assets by the enterprise, as well as the reflection of additional expenses included in their cost are reflected.
• "OS Accounting". This section provides documentation related to reflectionfacts of moving OS, carrying out their modernization or inventory.
• "OS Recycling". It is possible to write off the fixed asset or transfer it to another party.
• "OS depreciation". Describes operations for calculating and calculating depreciation.

Conclusion

The introduction of a system of rational accounting of fixed assets at enterprises is an important element of management and accounting activities, which underlies the growth in the profitability of using fixed assets.

The economic and social significance of the studied fixed assets at the macro level is explained by many reasons:

• fixed assets are recognized as a significant part of the national we alth of the country, and their increase leads to an increase in the we alth of the country;
• The competitiveness of domestic products and production efficiency largely depend on the size of fixed assets and their condition.