Some organizations may have at least a few fixed assets that need to be tracked in accounting. Whether you’re a large organization or small, it is important to know the requirements for tracking your fixed assets and depreciation. Tracking these accurately is essential for good stewardship and accountability. Check out this video of a previous webinar to learn more about fixed assets and how to track them in Aplos.

What Is a Fixed Asset?

A fixed asset is typically an item over a certain value and something you want to spread the cost of over time. Since it brings value to your organization, the cost is spread over its lifetime. Fixed assets are a common item found on a balance sheet in the assets section.

These are long-term or relatively permanent tangible assets, such as equipment, machinery, and buildings, that are used in normal business operations and depreciate over time. Examples include land, buildings, building improvements, equipment, or vehicles. You will determine whether an item is a fixed asset through a capitalization policy and will depreciate the item over the specified depreciable life policy.

What is Depreciation?

Depreciation can be referred to as the systematic reduction in the recorded cost of any fixed asset. Mandated by GAAP, the reason we record this depreciation is so that we can try to match a portion of the cost of a fixed asset to the revenue that it generates. This revenue though is a hard thing to calculate, so instead we calculate the depreciation.

Depreciation is recognized by the useful life of an asset. This is the time period by which the nonprofit expects that the asset will be productive. When the asset is no longer useful, the nonprofit will eventually need to dispose of the asset. Before doing this, the asset needs to be given a salvage value. Depreciation is then calculated based on the original cost of the asset, less any estimated salvage value.

Tracking Fixed Assets in Aplos

Fixed assets need to be depreciated on the balance sheet according to GAAP (generally accepted accounting principles). The assets are shown on the balance sheet at their book value – this equals the purchase price less depreciation. The tracking of this depreciation is called fixed asset tracking.

In Aplos, you have two options for tracking and recording fixed assets. If you use the Fixed Asset module, you can automatically calculate and apply depreciation for your fixed assets. If you track your fixed assets in a spreadsheet or in a different system, you can manually enter the purchase, depreciation, and disposal transactions.

Tracking fixed assets using the Fixed Assets Module

With Aplos' Fixed Assets feature you can create fixed asset accounts to track depreciation and the value of your assets over a period of time. On your balance sheet, you have the items that you own (assets). These might include items over a certain value that you want to show ownership of and spread out the cost of over time.

For example, you purchase sound equipment for your organization for $3,000. This amount is over the amount of the capitalization threshold your organization has set, which allows you to spread the expense out over the usable life of the item. Instead of considering the full value of the item in the period you purchased it, you can spread that cost out over a period of time.

Step 1: Link Your Fixed Asset Accounts

1. Navigate to Fund Accounting -> Fixed Assets and select "settings"
   
2. Locate the "Accounts" section
3. Search and select your Fixed Asset Account, Depreciation Expense Account, and Gain/Loss Accounts
   
   • If you are adding more than one Fixed Asset account, click "+ Add Asset Account." 
   • If you have not previously created one of these accounts, you can do so from your Chart of Accounts.

Step 2: Create Your Fixed Assets

Now that you have mapped your fixed asset accounts, you can create your fixed asset. There are two ways to create your fixed asset in Aplos

Option 1: Create from scratch

1. Navigate to the "Fixed Assets" tab
2. Click the green "+" button
   
   
   
   
3. Enter in the appropriate Asset Account and Fund to track your fixed asset
   
   
   
   
4. Enter in the purchase transaction information including:
   
   
   • • • Date fixed asset was purchased
       • Comment for overall transaction
       • Payee
       • Check # (if applicable)
       • Account the fixed asset was paid out of
       • Fund: This field will not need to be filled out because it will pull from the fund already selected above. 
       • Comment for the specific line item
       • Amount the fixed asset was purchased for
         
         
   • If your purchase transaction needs to be split out by more than one account select the add another row option*
5. Record the Asset details including:
   
   
   • • • Amount
       • Asset ID and Name

       • Effective Date: the date the asset will start being used

       • Type of asset: this will determine the depreciation schedule.

       • Accumulated Depreciation account 

       • Depreciation method and schedule
         • You’ll see a breakdown of the Total and Monthly Depreciation on the right of the screen.

       • Previous Depreciation: check this box if your fixed asset was previously depreciated outside of Aplos. This will allow the previous depreciation to be calculated in your remaining amount to depreciate
         
         
         

6. Click the "Add New Asset" button if you need to create multiple fixed asset items for the single Fixed Asset account
   
   
   • • ex. you may spend $15,000 on three computers, which were $5,000 each. Your Purchase Transaction will total $15,000, but you will create three different assets for $5,000—one for each computer purchased.
     • Pro tip: you can select the box with the down arrow to the right of your first asset and copy it to cut down on data entry
       
7. Once all details have been filled out, click the green "save" button

Option 2: Create from an existing purchase transaction

If you have already recorded your purchase transaction in Aplos for your fixed asset, no worries! Once you complete your set up, our system will recognize this and give you the option to create your fixed asset from that transaction.

1. Navigate to the "Fixed Assets" tab
2. Select the alert to the right stating "you have ## assets you may need to add!" 
   
   
   
   
   
3. Click the "create" button to the right of the transaction you would like to created your fixed asset from
   
   
   
   
   
4. Fill out the asset details
5. Click the green "save" button

Once you have recorded the purchase of your asset, it will appear on your Fixed Assets tab.

Step 3: Record Depreciation 

Now you’re ready to record depreciation. The software will automatically factor the deprecation for you and will show each transaction related to the depreciation of that asset on the Pending Depreciation Transactions page. The only action you will need to take is to check over the transaction and then post it. The depreciation will NOT automatically post to your accounting.

1. Navigate to the "Depreciations" tab
2. Click the arrow to the left to view details of the deprecation, which will show the related asset.
3. Check the box next to any deprecation transaction that needs to be posted
4. Click "Post Selected." This will post the depreciation as a Journal Entry.

Step 4: Disposal of Fixed Assets

If at any point you sell a fixed asset, you can record the disposal of it in Aplos. 

1. Navigate to your Fixed Assets tab
2. Choose the asset you’d like to dispose of and click on it
3. Select the arrow icon in the upper right corner and choose "Dispose."

This will allow you to enter the amount you sold the item for, which will factor any gain or loss on the asset. Once you click the "Dispose" button, the software will post a Journal Entry for that gain or less on the asset, which will reverse the asset and remove it from your Balance Sheet.

Step 5: Reviewing Depreciation Schedule

If you have Fixed Assets enabled, you can find the Depreciation Schedule report in the Other Reports section of the Report Screen. This report tracks the accumulated depreciation amount over the span of an asset's life. With this report, you now will be able to efficiently test your fixed assets and accumulated depreciation in the event of an audit.

Manually Entering Depreciation for Fixed Assets

If you do not wish to use the Fixed Asset module, you can still handle Fixed Assets manually in Aplos, we recommend following these steps:

1. Create a new Asset account in your Chart of Accounts.
2. Enter a Starting Balance for your account on the Starting Balances page.
3. Create a new Expense Account for your depreciation in your Chart of Accounts.
4. Record your depreciation as a payment entry in the Register.

Note: The information provided here is for educational purposes only and is not intended to serve as professional tax advice for your organization. Be sure to consult a licensed tax advisor if you have any questions.