Fixed asset card

What it means

A fixed asset card, often called an inventory card, is the record kept for each item of fixed assets. It shows the name and description, inventory number, date of acquisition and of putting into use, acquisition cost, depreciation group, depreciation method, location and the person responsible.

Throughout the asset’s life the card also records changes: a capital improvement that raises its cost, suspension of depreciation, transfer to another cost centre, partial disposal and finally disposal by sale, scrapping or loss.

The card links the accounting and tax records. Accounting and tax depreciation often differ, and the card shows both side by side, including the net book values. Today it is kept almost exclusively in the accounting software as part of the fixed assets module.

How it works in practice

When a new asset is added, we take the data from the invoice, the delivery note and the acceptance protocol. What matters is the date the asset is put into use, from which depreciation starts, and correctly identifying the incidental costs that belong in its cost.

The depreciation plan and the depreciation schedule for the tax return are compiled from the asset cards. At the stocktake they are used to check that each asset physically exists where stated and in what condition.

For more expensive equipment we recommend recording the serial number and a photo on the card. After an insured loss, a theft or a sale, this makes it much easier to prove which item is concerned.

What to watch out for

A common mistake is an asset that no longer physically exists but is still on a card and being depreciated. At the stocktake, broken or lost items must be properly disposed of, otherwise the balance sheet overstates assets and the depreciation is unjustified.

The second risk is the reverse: a capital improvement booked as repairs and never added to the card. The cost is then taken in one go instead of being depreciated, and at an audit the tax office reclassifies it, with additional tax and a penalty.