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 alex@aplos.com

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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

Purchase of the Fixed Asset

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Depreciation of the Fixed Asset

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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!

Conclusion/ Q&A

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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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