What is a fixed asset?

An asset is an expense, but that expense is spread over a number of years i.e. depreciated.
Read an article on depreciation here

A fixed asset is a solid asset that usually has a life span of more than one year and is worth something e.g. A car, a computer, desk and chairs. A calculator, while meeting the criteria of something that lasts more than a year, if its value is €15 it would not make it worth being considered as an asset.

When is an asset worth being called an asset?

Each company may have different criteria as to what is considered a fixed asset. Some companies capitalise (not treat the item as an expense, but treat them as a fixed asset) items with a value over €500, while others would treat anything under €1500 as an expense and over €1500 as a fixed asset.

How do you record the purchase of a fixed asset?

Depending on how you paid for the asset will determine how you record it in your accounts system.
Examples of how you might pay for a van:

1. Cheque or cash
2. Hire purchase agreement
3. Lease agreement
4. Bank loan
5. Owner of the company uses his own money

Cheque or cash
You get a purchase invoice from the supplier
Simply enter the purchase invoice in your accounts system
Use the nominal code for Motor Vehicles

Hire purchase agreement
You get a purchase invoice from the supplier
Simply enter the purchase invoice in your accounts system
Use the nominal code for Motor Vehicles
Enter a Debit Journal against the suppliers account and code to Hire Purchase account
(The Hire Purchase Account is a Balance Sheet account)
The payment each month must be entered as a non supplier payment i.e. entered directly to the nominal ledger code.

Lease agreement
The Leasing company gets the invoice  from the supplier
Enter a monthly invoice you got from the leasing company for the lease each month in the creditors ledger
In the nominal ledger do the following journal.
Dr - Motor Vehicle Account with price excluding VAT
Cr - Leasing Account with price excluding VAT
(The Leasing account is a Balance Sheet account)

Bank Loan
You get a purchase invoice from the supplier
Simply enter the purchase invoice in your accounts system
Use the nominal code for Motor Vehicles
Enter a Debit Journal against the suppliers account and code to a Bank loan account
(The Bank loan account is a Balance Sheet account)
The payment each month must be entered as a non supplier payment i.e. entered directly to the nominal ledger code.

Owner pays for Van with his own money (limited company only)
You get a purchase invoice from the supplier
Enter the purchase invoice in your accounts system
Use the nominal code for Motor Vehicles
Enter a Debit Journal against the suppliers account and code to a Directors loan account
(The Directors loan account is a Balance Sheet account)

Outline of Balance Sheet accounts and Profit & Loss codes

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(c) Nilsson Denver Ltd 2007