Fixed assets constitute a major chunk of the total assets in the case of all manufacturing entities. Even in the case of service entities such as hotels, banks, financial institutions, insurers, mobile / telephone service providers etc. it has become imperative to invest heavily in furnishing, equipment, and technology to attract, and retain customers. It is important for a business entity to have a list of its fixed assets. A fixed asset register is that list of assets.
Identification of a fixed asset
In a large corporation, the task of identifying and locating a specific fixed asset can be difficult unless numbering is scientific, systematic, and up-to-date. A common problem in most companies is the improper maintenance of the FAR. Physical verification of fixed assets becomes a futile exercise unless the FAR is properly maintained.
It would be advisable to use a scientific numbering technique to identify fixed assets. The process of numbering fixed assets is called tagging.The purpose of Tagging assets is Tracking movement of assets from one place to another place. An identification number (combination of alphabets, and numbers) is written on the asset. Engraving the identification number on the asset is advisable in the case of plant and machinery where there is heavy wear and tear.
A tag verifies the existence of assets and their location, aids in maintenance, provides a common ground for communication between the Accounts Department and the end-users and recording the net book value of asset in case of sale / scrapping.
It is not necessary to tag all fixed assets. Land, buildings and vehicles all have independent systems of tracking in registration papers and survey numbers.