According to Financial Accounting Standards, in the basic framework for the preparation and presentation of financial statements (2002, p. 13, paragraph 49), assets are defined as resources controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow. obtained by the company.
Assets are generally divided into current assets and fixed assets.
Definition of Fixed Assets
Assets are assets that are the company’s economic resources that are used for the company’s operational activities.
According to Financial Accounting Standards, in the basic framework of the preparation and presentation of financial statements.
To produce this product, the role of fixed assets is very large, such as land as a place of production, buildings as factories and offices, machinery and equipment as tools for production and others.
To understand about fixed assets, there are several opinions that will be expressed, including the following:
Fixed assets are tangible assets that are acquired in ready-to-use or pre-built form, which are used in the company’s operations, are not intended to be sold in the framework of the company’s normal activities and have a period of time. benefits for more than one year.
From the above definition what is meant by fixed assets are:
- Is a tangible asset
- Has a useful life of more than one year
- Used in company operations
- Not intended for resale
Fixed Assets Group
Fixed assets are grouped because they have different properties from other assets. The criteria consist of various types of goods, so further grouping of these assets is carried out.
The grouping depends on the accounting policies of each company because generally the more fixed assets owned by the company, the more groups there are.
Fixed assets owned by the company consist of various types and forms, depending on the nature and line of business in which the company is engaged.
It is often a major part of the company’s assets, therefore significant in the presentation of financial position.
The relatively large value and various types and forms of these types of assets cause companies to be careful in classifying them.
Of the various fixed assets, for accounting purposes, the classification is carried out as follows:
- Which are generally not limited such as land for the location of companies, agriculture and animal husbandry.
- Which are generally limited and when the period of use has expired, it can be replaced with similar assets, such as buildings, machinery, tools, furniture and others.
- Which are generally limited and when the period of use has expired cannot be replaced with similar assets, for example natural resources such as mining products and others.
According to Sofyan Safri H, fixed assets can be grouped in various angles, including:
Based on Substance Angle
- Tangible Assets or tangible assets such as land, machinery, buildings, and equipment.
- Intangible Assets or intangible assets such as Goodwill, Patent, Copyright, Copyright, Franchise and others.
Based on Depreciated Angle or Not
- Depreciated Plant Assets are fixed assets that are depreciated such as Building, Equipment, Machinary (Machinery), Inventory, Road and others.
- Undepreciated Plant Assets are assets that cannot be depreciated, such as land.
Types of Fixed Assets
According to S. Munawir (2007) the types of assets or fixed assets are as follows:
- Land – Land is a stretch of land that is either a building site or an empty one. In accounting, if there is land where buildings are built on it, the recording must be separated from the land itself.
- Buildings – Buildings are buildings that stand on this earth either on land/water. The records must be separate from the land where the building is located.
- Machines include equipment that is part of the machine in question.
- Vehicles – All types of vehicles such as haulers, trucks, graders, tractors, forklifts, cars, motor vehicles and others.
- Furniture – This type includes office furniture, laboratory furniture, factory furniture which is the content of a building
- Inventory – Equipment that is considered to be the major tools used in the company such as office inventory, factory inventory, laboratory inventory, warehouse inventory and others.
- Infrastructure – Infrastructure is a custom that the company makes a special classification of infrastructure such as: roads, bridges, rails, fences and others.
From the description of the types above, fixed assets can also be classified into tangible and intangible fixed assets.
Tangible Fixed Assets
Tangible fixed assets are fixed assets that have a physical form. There are 3 types of tangible fixed assets or assets, examples of which are:
- Assets that have a source of depreciation or depreciation, for example, are buildings or buildings, equipment, inventory, vehicles, production machines and others.
- Assets that have a source of depletion or depreciation, such as mineral mines, mineral deposits or other natural resources. Natural resources or mining can be depleted by exploitation activities for these resources. Therefore, natural resources must be allocated in periods, in which natural resources or mining can produce results.
- Assets that do not experience depreciation or do not experience depletion, for example, such as the place or land on which a company building is erected and so on.
Tangible fixed assets are assets that have a physical form and are relatively permanent. Tangible assets or fixed assets can also experience depreciation, some examples of this type are:
- Buildings and buildings
Intangible Fixed Assets
These are assets that do not have a physical form, even though they have great benefits for the company which are expressed in the form of certain guarantees, such as copyrights, monopoly rights, patents, trademarks and so on.
Intangible assets or fixed assets are usually in the form of business rights owned by the company, among others, some examples of this type are:
- Security System
Fixed Asset Characteristics
According to Jerry J. Weygandt (2007), the characteristics of fixed assets are:
- Have a physical form (clear shape and size)
- Used in operational activities
- Not for sale to consumers
Meanwhile, according to Soemarso SR (2005), the characteristics of fixed assets are as follows:
- The useful life is more than one year
- Used in company activities
- Held not for resale in the normal activities of the company
- The value is quite large
Acquisition of Fixed Assets and Method of Recording
The following is an explanation of how to obtain fixed assets or assets:
Fixed assets obtained from cash purchases are recorded in the books with an amount equal to the money spent.
And if in a purchase obtained more than one type of fixed assets, the acquisition price must be allocated to each of them.
For example, in purchasing a building and its land, the acquisition cost is allocated to the building and land.
The basis of allocation used is as far as possible with the relative market price of each asset, namely in the case of the purchase of land and buildings, the market price of land and the market price of buildings are sought, each of which is compared and becomes the basis for the allocation of the acquisition price.
If fixed assets are obtained from the purchase of installments, then the acquisition price may not include interest.
Interest during the installment period, whether clearly stated or not stated separately, must be removed from the acquisition price and charged as interest expense.
The method of recording is that payments are made every year in a journal that reduces the debt for the principal amount of the loan that is repaid and debits interest costs for the year concerned and credits cash in the amount of installments.
Exchanged for Securities
Fixed assets obtained in exchange for company shares or bonds are recorded in the general ledger at the market price of the shares or bonds used as exchangers.
If the market price of the stock or bond is not known, the acquisition price is determined at the market price of the asset.
If the market price of the securities and fixed assets exchanged is not known, then in such circumstances the exchange value is determined by the decision of the company’s management.
This exchange value is used as the basis for recording the acquisition price of fixed assets and the values of securities issued.
The exchange of fixed assets with company shares or bonds will be recorded in the Capital Shares or Bonds Payable account at the nominal value, the difference between the exchange value and the nominal value is recorded in the Agio/Disagio account.
Fixed assets, for example machines xxxx
Agio Shares xxxx
If in this exchange the company adds an advance, the acquisition price of the machine is the amount of money paid plus the market price of the securities being exchanged.
Exchanged with other Fixed Assets
Many purchases of fixed assets are made by way of exchanging or the popular term “trade-in”.
Old assets are used to pay for new assets in whole or in part where the shortage is paid in cash.
In this condition, the principle of fixed acquisition cost must be used, namely that new assets are capitalized at the amount of the old asset price plus the money paid (if any) or capitalized at the market price of the new asset received.
Earned from Gifts or Donations
Fixed assets obtained from gifts or donations can be recorded deviating from the cost principle.
To receive a gift is often also incurred costs, but these costs are much smaller than the value of the fixed assets received.
If the fixed assets are recorded at the costs that have been incurred, then this will cause the amount of assets and capital to be too small, as well as the depreciation expense to be too small.
To overcome this situation, assets received as gifts are recorded at their market prices.
Depreciation or depreciation of fixed assets received from gifts is calculated in the same way as others.
Self Created Assets
Through certain considerations, companies often make their own assets or fixed assets that are needed, such as buildings, tools, and furniture.
Making these assets is usually with the aim of filling the capacity or employees who are still idle.
All costs that are charged for the manufacture of own assets such as materials, direct wages, and direct factory overhead do not cause problems in determining the cost of fixed assets made.
But for indirect factory overhead costs raise a question about how much should be allocated to the assets being created?
There are 2 ways to charge factory overhead:
- An increase in factory overhead costs assigned to created assets.
- Factory overhead costs are allocated to the rates for asset creation and production.
How to Simplify the Recording of Fixed Assets?
Fixed assets have many ways of acquisition so that the recording will be adjusted according to the way they were obtained and the conditions prevailing when the fixed assets were acquired by the company.
In order for the recording of fixed assets, there is no misplacement of financial transaction records, it is better if companies start using online accounting software.
That is the meaning of fixed assets or assets as well as examples and types. Hopefully the information above is useful.