Fixed assets and depreciation
Record a durable asset, choose its useful life, post the annual charge, and say through which door the asset enters the balance sheet: paid, donated or inherited from before.
A durable asset (a building, a sound system, a vehicle) loses value over time. If you do not recognise that wear, the "Fixed assets" line of your statement of net assets stays forever at its purchase price, and your church believes it owns what it has already consumed.
Depreciation is the accounting way of saying: this asset serves us for several years, it must weigh on several years.
Expense or fixed asset?
That is the first question, and two simple criteria settle it.
| The asset… | Then |
|---|---|
| Serves more than a year and costs above your church's threshold | Fixed asset, to depreciate |
| Is consumed within the year (supplies, maintenance) | Expense of the year |
| Serves a long time but costs little (a chair, a spare microphone) | Expense of the year |
Capitalising a 60 asset brings nothing and forces you to track it for five years. Expensing a building, conversely, ruins two sets of accounts at once: the year of purchase, and every following year that will look flattering.
Recording an asset
- Open Finance, then Reports, Accounting section, Fixed assets tab.
- Click Add a fixed asset: label, category, acquisition date, value, useful life.
- Before you confirm, the screen tells you what this asset will weigh on your result each year.
- Answer the question "How does this asset enter the balance sheet?" (see below).
Point 3 is the information that really matters: a 3,000 projector over 3 years is 1,000 of annual charge. That is the figure a board must know before buying, not the price.
Note: the useful life suggested per category (33 years for a building, 3 years for IT equipment) is common practice, not a rule. Your accountant may choose another according to the real use of the asset. That is why the field stays free.
Through which door the asset enters
The same asset can arrive in four different ways, and the entry is not the same. The system therefore asks instead of guessing.
| Your answer | What the system posts |
|---|---|
| We paid for it here | The purchase was recorded as an expense. The amount moves from expense to assets: cash does not move, only the allocation changes. |
| We already had it | The asset predates your opening balances. Its counterpart is the starting net assets, never an expense of this year. |
| It was given to us | A gift in kind: the asset enters the balance sheet without a cent leaving the cash box, and the generosity received appears in the income statement. |
| Post nothing for now | The asset joins the register alone. The balance sheet will keep ignoring it, and the consistency check will remind you. |
Warning: "We already had it" assumes your opening balances are recorded. If they are not yet, do that first from the Net assets tab, otherwise the entry has no counterpart to lean on.
What the screen shows you
- Acquisition value: what you paid. It never moves, it is information to keep.
- Accumulated depreciation: what has already been recognised as worn.
- Net book value: the difference. That is what your assets are really worth today, and it is that figure which appears in net assets.
An asset bought during the year is only depreciated from its month of purchase. A sound system bought in October counts three months in the first year: counting a full year would inflate the charge and distort the comparison with the following year.
Posting the annual charge
At the end of the year, click Post the depreciation charge. An entry dated 31 December goes to the journal, your result for the year drops by that much, and so does the net book value of your assets.
Warning: until the charge is posted, your statement of net assets ignores the year's wear and your result is overstated. The screen shows the pending amount in orange for that reason, and the consistency check flags it too.
The entry is sealed as soon as it is recorded: undoing it requires a reversal. So post the charge after checking that every asset of the year is in the register.
The link with the inventory
The Inventory module knows your equipment; accounting knows your fixed assets. The two can diverge in silence, each right about its own data.
The screen therefore flags inventory items above the threshold that appear in no fixed asset, and offers to capitalise them in one click. The purchase price and the date come from the inventory and are not re-entered: re-entering them would be an opportunity to contradict them.
The useful life, however, is asked of you. No inventory field carries it: it is a decision, and guessing it would produce a false balance sheet that looks right.
Note: items below the threshold are not forgotten. The screen tells you how many there are and reminds you that they are an expense of the year, not an asset to depreciate.
Removing an asset from the register
When an asset is sold, given away or scrapped, click Dispose. The system clears the accounts: the asset leaves the balance sheet, its accumulated depreciation goes with it, and whatever was not yet depreciated becomes an expense of the year.
Note: if you sold the asset, record the proceeds as ordinary income. They are not accounted for by the disposal: posting them in both places would count them twice.
Common mistakes
- Capitalising without ever posting the charge. The balance sheet grows every year and never comes back down.
- Entering an estimated current value instead of the price paid. The purchase price is a verifiable fact; an estimate is not, and it will make all your depreciation debatable.
- Capitalising an asset already expensed without choosing "We paid for it here". The amount would be counted twice: once as an expense, once as an asset.
- Forgetting to dispose of a scrapped asset. Your balance sheet then carries equipment that no longer exists, and nobody notices before a physical inventory.