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Managing Your Small Business Assets

February 6, 2010

Anything that your small business owns is considered to be an asset and should be listed as such on the Balance Sheet. Some assets are intangible and are not physically owned by the business (e.g. stocks or patents). The cash and inventory that the business owns at the moment is referred to as its current assets.

In business terms, a fixed asset is a purchase that has an ongoing use over a number of years. The most common items that a small business might list as a fixed asset are computers (including high-cost extras like printers and software), office furniture and equipment such as the telephone.

Fixed assets are subject to a process known as depreciation. This involves calculating the wear and tear on the object over the years that your business uses it. Depreciation is important in order to avoid the value of assets being overstated on the Balance Sheet ā€“ a piece of equipment is worth far less in its fifth year of use than when it was first purchased.

To calculate depreciation you need to know the date on which you started using the object and how much it initially cost. You must also have an estimated lifespan for the object and whether it will still have any value when you come to dispose of it.

Remember that not all fixed assets are subject to depreciation. Land or real estate will often increase in value year-on-year.

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