assets are tracked for inventory control and accounting purposes.So, how does a company gain profits? Well, that is to maximize revenue and minimize asset spending (money and others). That is why a company will do its very best to ensure that it protects all of its properties and assets and that the value of these things is properly indicated on its financial statement. To do that, an asset accounting policy is needed.
Such a policy will help guide all employees to protect the company’s assets and how it is treated from an accounting perspective.
Now, no company has nearly the same principles, which is why every asset accounting policy should be tailored to each individual organization. However, despite the custom policies, it still has to adhere to some standards that are set in the industry the business operates in.
In today’s article, I will talk about this particular policy. Do not worry if you do not know how to create such since corporate accounting services in Malaysia are pretty affordable and they know what they’re doing.
An asset accounting policy has many sections. One section will include a section for asset clarifications. If there are any broad groups of assets, it will be grouped accordingly.
Common types of assets that are grouped together include buildings, land, equipment, and machinery. These are main classes, but it is important to note that it also contains subclasses (if there are any).
For example, some subclasses of equipment may include furniture and office equipment, among others.
The policy also mandates that the requirements of capitalization– or the process of recording a particular expense in the book as an asset instead of an expense- is required.
For this to be reflected on the financial statements, it follows certain criteria that include an estimated useful life of an asset and its minimum dollar threshold. A good example of this would be that the policy may require all expenditures over $2000 with an estimated useful life of two years be capitalized in the record books.
It is also important to note that the asset should meet both criteria, otherwise it will be still considered as an expense at the time of purchase.
If the company will acquire something that is beneficial to business operations, then the asset accounting policy may require that the costs to record a capital asset to the company’s financial statements should include all expenses incurred for purchasing and using a particular asset.
For instance, if you acquire a certain piece of machinery and you paid for the asset, as well as its transportation and installation costs, all of those things that you have to pay for should be recorded in the books and be labeled as an asset.
The policy also includes other company processes, including its methods for purchasing assets, calculating depreciation, and the method by which