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Best Practices in Tracking Church Fixed Assets
Alex Acree
Accounting Product Manager at Aplos Software
Alex Acree
Alex Acree is an accounting expert that built the support team at Aplos and now guides product development and the new Bookkeeping Services department of Aplos. He won a Gold Stevie Award for excellence in Customer Support last year.
Contact him at [email protected]
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Introduction
• Fundamentals of Fixed Assets• Calculating and comparing different methods of depreciation• Allocating fixed asset costs according to GAAP standards* Maintaining a record of depreciation for each fixed assets* How software can help you track fixed assets
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 on the material provided here.
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Most churches have at least a few fixed assets that they need to track in their accounting, so whether you are a large church 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. In this webinar we will cover:
Asset vs Fixed Asset
Asset: A possession that is tracked in your financial system - if an item is over a certain value it is a fixed asset
Fixed Asset: Brings value to your organization and the cost is spread over its useful life
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What is a Fixed Asset
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Long term or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.
Land Building Equipment VehiclesBuildingImprovements
Capitalization Policy
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The determination of whether an item is a fixed asset is made possible through a capitalization policy. Typically, this policy will state that fixed assets must meet two criteria:
A useful life of more than one year, andCost more than a certain amount — ex: anything over $300
Equipment:Sound Board
$10,000
Equipment:Computer
$3,000
Depreciable Life Policy
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The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.
Useful Life — The estimated lifespan of a depreciable fixed asset, during which it can be expected to contribute to company operations.
Building:
40 Years
BuildingImprovmts:
Life of original asset min 20 years
Furniture &Equipment
5-10 years
Computers
5 years
Vehicles
3-5 years
Depreciable Life Policy: Methods of Depreciation
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The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.
Calculating Depreciation Value
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Cost - Amount Paid for the Asset
Salvage or Residual Value — The estimated value of a fixed asset at the end of its useful life.
Book Value — The cost of a fixed asset minus accumulated depreciation on the asset.
Cost - Salvage Value / Years
Book Value
Depreciable Life Policy: Depreciation Example
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Vehicle = $10,000 (capitalization policy) over 5 years (depreciable life policy)
Year 1 = $2,000 depreciated ($166.67 monthly)Year 2 = $2,000 depreciated ($166.67 monthly)Year 3 = $2,000 depreciated ($166.67 monthly)Year 4 = $2,000 depreciated ($166.67 monthly)Year 5 = $2,000 depreciated ($166.67 monthly)
At the end of 5 years the asset will be fully depreciated, and the net book value will be $0. The expense has been spread out over it’s useful life.
When NOT to depreciate a fixed asset
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Reaches Salvage ValueExample: If a $10,000 asset is a salvage value of $500, you depreciate $9,500 over the right amount of years, and it retains $500 at the end of the depreciation cycle.
Retire the asset from service:- Sold- Abandoned, destroyed, converted to scrap- Converted to personal use
Tracking Fixed Assets in Your Accounting
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Accounts Needed in your Chart of Accounts
AssetsCash Account (ex: checking)Fixed Asset Account (ex: vehicle fixed asset)
Accumulated Depreciation AccountLiability
Loan Account (if applicable)Expense
Depreciation ExpenseLoss on Disposal Expense
IncomeGain on Sale Income
Gain or Loss on Disposal
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Gain…
- Asset sells for a higher value than it’s net book value.- All accumulated depreciation is removed, along with the asset value on the books- Gain recorded to “Gain on Disposal” income account
Loss…
- Asset sells for a lower value than its net book value- Asset is lost or stolen- All accumulated depreciation is removed, along with the asset value on the books- Loss recorded to “Loss on Disposal” expense account
Benefits of Fixed Asset Software
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- Automatically applies monthly depreciation over the lifespan of the item
- Easier to track large volume of assets
- Reduces errors or missed journal entries
Aplos Fixed Assets
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- Automatically applies monthly depreciation over the lifespan of the item- Easier to track large volume of assets- Reduces errors or missed journal entries
Plus…
- Allows for custom asset names and unique identifiers- Automatically creates the journal entry that needs to be posted- Easy to dispose of fixed assets, both gain and loss- Filter access to diving in to one group of fixed assets- More!
About AplosWe’re the #1 solution in online accounting software for
nonprofits.
Accounting is the backbone of good stewardship in the
church. By tracking your assets correctly you can
demonstrate transparency with your members and care
for your all you have been entrusted with appropriately.
Aplos helps you track giving and ensure your members
trust the financial management of your organization.
Visit aplos.com for more information.
"Nonprofits all across the country
are praising the software's ease of
use, reasonable price, and great
customer service." - NPTechNews
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