Elements Of The Accounting System: Fixed Assets How much are your business's assets worth?

Fixed assets are items that are for long-term use, generallyfive years or more. They are not bought and sold in the normalcourse of business operation. Fixed assets include vehicles, land,buildings, leasehold improvements, machinery and equipment.

In an accrual system of accounting, fixed assets are notrecorded when they are purchased, but rather they are expensed overa period of time that coincides with the useful life (the amount oftime the asset is expected to last) of the item. This process isknown as depreciation. Most businesses that own fixed assets keepsubledgers for each asset category as well as for each depreciationschedule.

In most cases, depreciation is easy to compute. The cost of theasset is divided by its useful life. For instance, a $60,000 pieceof equipment with a five-year useful life would be depreciated at arate of $12,000 per year. This is known as straight-linedepreciation.

There are other more complicated methods of fixed-assetdepreciation that allow for accelerated depreciation on the frontend, which is advantageous from a tax standpoint. You should seekthe advice of your CPA before setting up depreciation schedules forfixed-asset purchases.

Excerpted from Start Your Own Business: The Only Start-UpBook You'll Ever Need, by Rieva Lesonsky and the Staff ofEntrepreneur Magazine, © 1998 Entrepreneur Press

Editor's Pick

Productivity

There's a Scientific Reason You Can't Stop Thinking About Unfinished Tasks. Learning to Harness That Energy Will Make You More Productive.

Why unfinished work captures our attention more than finished tasks, and how to leverage that psychological tendency for both personal and professional betterment.

Leadership

Here's How Critical Thinkers Unlock Unimaginable Success

On this episode of "The Jeff Fenster Show," Contrarian Thinking founder Codie Sanchez breaks down risk-taking, deal-making, and the personal mental processes that will help you achieve your goals.

Buying / Investing in Business

Get Better at Real Estate Investing with Mashvisor — on Sale for Just $39.99

A lifetime subscription regularly costs $899.

Starting a Business

Its First Year, This Startup Struggled to Get 75 Clients. Five Years Later, They Have 18,000. Here's How They Did It.

Financial planning startup Facet knew they were targeting a huge untapped market. But getting clients wasn't as easy as they hoped.

Money & Finance

Want to Become a Millionaire? Follow Warren Buffett's 4 Rules.

Too many entrepreneurs are counting too heavily on a company exit for their eventual 'win.' Do this instead.

Data & Recovery

Get a Cybersecurity and IT Bootcamp For $39.97

Help keep your digital assets safe with cybersecurity courses (reg. $754) on sale for a limited time.