Mission, Gail Kirsten M.

BSA21KB1

Physical Fixed Asset System

Computer Based Fixed Asset System

 Computer-based fixed asset system demonstrates real-time processing.

 The top portion of the flowchart presents the fixed asset acquisition procedures, the center portion
presents fixed asset maintenance procedures, and the bottom portion presents the asset disposal
procedures.
  To simplify the flowchart and focus on the key features of the system, we have omitted the
processing steps for AP and cash disbursements.
 The process begins when the fixed asset accounting clerk receives a receiving report and a cash
disbursement voucher. These documents provide evidence that the firm has physically received
the asset and show its cost.
 From the computer terminal, a clerk creates a record of the asset in the fixed asset subsidiary
ledger.

Asset Maintenance

 The fixed asset system uses the depreciation schedules to record end-of-period depreciation
transactions automatically.
1. calculating the current period’s depreciation
2. updating the accumulated depreciation and book value fields in the subsidiary records
3. posting the total amount of depreciation to the affected general ledger accounts
(depreciation expense and accumulated depreciation)
4. recording the depreciation transaction by adding a record to the journal voucher file
 Department managers must report any changes in the custody or status of assets to the fixed asset
department.

Disposal Procedures

 When the clerk deletes the record from the fixed asset subsidiary ledger, the system
automatically:
1. posts an adjusting entry to the fixed asset control account in the general ledger
2. records any loss or gain associated with the disposal
3. prepares a journal voucher

Controlling the Fixed Asset System

 Authorization Controls
 Each transaction should be initiated by a written request from the user or department.
 In the case of high-value items, there should be an independent approval process that
evaluates the merits of the request on a cost-benefit basis.
 Supervision Controls
 Supervisors must ensure that fixed assets are being used in accordance with the
organization’s policies and business practices.\
 Independent Verification Controls
 The internal auditor should verify the location, condition, and fair value of the
organization’s fixed assets against the fixed asset records in the subsidiary ledger.
 The automatic depreciation charges calculated by the fixed asset system should be
reviewed and verified for accuracy and completeness.