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When applying for credit facilities or funding, banks can easily determine the risk factor from the balance sheet, so skilled asset accounting plays a key role in sustaining and growing a company.

Assets are owned or controlled by a company, and understanding and managing your assets well helps to ascertain the equity value of a business.

Fixed asset accounting is the precise recordkeeping of a business’s financial records of your capital assets. Following the acquisition of a fixed asset, each asset’s lifecycle includes at least three of the five life stages listed below:

  1. Asset acquisition. Entering the new asset into the books.
  2. Asset depreciation. As the asset value declines over time, the value of the asset must be recalculated.
  3. Asset revaluation. An accurate assessment of current market value.
  4. Asset impairment. This can be referred to as ‘writing down’ and is a reassessment of an asset’s value based on new events or circumstances.
  5. Asset disposal. The planned selling, scrapping, or disposing of an asset at the end of its life cycle.

Managing your assets well helps you to notice inconsistencies or differences between your notes and the actual state of your assets. This also promotes transparency and provides a clear picture of a company’s capital, cash flow and other key financial metrics.

 

Nico de Kock CA (SA)
Managing Director
Mubesko Africa
nico@mubesko.co.za
mubesko.co.za

Mubesko Africa operates in the private and public sectors, offering financial accounting support and management solutions, asset accounting and modelling, and forensic services and investigations.