Dynamics GP – Property Accounting Applications
Property accounting applications concern an organization’s fixed assets and investments. An important element of effective internal control is the accurate and timely processing of information relating to fixed assets and investments. Such processing is accomplished through the use of special accounting applications that provide for accounting, operational, and management information needs.
There are four objectives of fixed asset of investment accounting application:
- Maintain adequate records that identify assists with description, cost, and physical location.
- Provide for appropriate deprecation and/or amortization calculations for book and tax purposes.
- Provide for reevaluation for insurance and replacement cost purposes.
- Provide management with reports for planning and controlling the individual asset items.
Fixed assets are tangible properties such as land, buildings, machinery, equipment, and furniture that are used in the normal conduct of a business.
These items are relatively permanent and often represent a company’s largest investment. Transactions that change the amount of investment in fixed assets tend to occur infrequently and usually involve relatively large amounts of money.
A company accumulates many assets over the life of the business, disposes of assets(by retirement, sale, or other means), moves assets from one location to another, and match the costs(other than land) to revenues by means of periodic depreciation charges over the estimated useful life of the asset. To accomplish these tasks efficiently and to provide adequate control, an automated system is frequently required.
Every organization, including those on a cash basis, should keep a ledger of fixed assets as an aid to effective control. A fixed â€“asset register is a systematic listing of an organizations fixed assets. A separate section of the fixed asset register is usually kept for each major category of asset. This categorization should be consistent with the general ledger account descriptions. For example, an organization may have separate ledger accounts for buildings, furniture and fixtures, and automobiles. There would be a separate section for each of these categories. Assets themselves should be labeled with identifiers linked to the fixed-asset register.
When each asset is acquired, it should be tagged and entered in the fixed asset register. The total dollar amount shown in the register should agree with the general ledger control accounts. For this reason, entries must be made in the fixed-asset register not only to record addition but also to asset sales or other dispositions.
Several entries must be made when an asset is disposed of. The first records the date of disposal. The second entry removes the accumulated depreciation taken to date. A fixed-asset register functions as a subsidiary ledger to the corresponding general ledger control accounts.
Investments, like fixed assets, require separate records; typically, an investment register is used to provide accounting control over investments. As with all other assets, custody of investment should be separate and distinct from record keeping. The investment register should contain all relevant information, such as certificate number and the par value of securities, to facilitate identification and control. All investment transaction should be duly authorized and documented. A common control practice with respect to the physical handling of investment securities is to require two people to be present when the firms safe deposit box or other depositor is entered.
Internal Accounting Control Practices
The following questions suggest the internal accounting control procedures that would be expected in a property application system.
- Do procedures require authorization by an official or committee for expenditures (possibly over certain amounts) for
- Capital assets?
- Repairs and maintenance?
- Are actual expenditures compared to budgets and additional approvals required if budget authorization is exceeded?
- Do written procedures exist that provide for distinguishing between capital additions and repair and maintenance?
- Do procedures require formal authorization for the sale retirement, or scrapping of capital assets?
- Are these records maintained by people other than those who are responsible for the property?
- Are the detailed records balanced at least annually with the general ledger controls?
- Are the detailed record balanced at least annually with the general ledger controls?
- Are physical inventories of property taken periodically under the super vision of employees who are not responsible for the custody of recording of such properties?
- Are periodic appraisals of property made for insurance purposes?
- Are significant discrepancies between book records and physical inventories reported to management?
- With regard to small tools:
- Are these physical safeguarded and is responsibility for them clearly defined?
- Are they issued only upon written authorization?