The Fixed Asset Register, and What an Auditor Looks For

A fixed asset register is not a list of things you own. It is the bridge between three numbers that have to agree: what the ledger says, what the register says, and what is physically in the building.

Auditors test the bridge. Most register problems are really bridge problems.

What each line has to carry

A register that cannot answer these questions will fail the first test it meets:

• Identity — a unique tag number, and that number physically on the asset
• Description specific enough to find it, including make, model and serial where they exist
• Location, and a custodian or department
• Date put to use, which is not always the invoice date and matters for the half-year rule
• Actual cost, and what is in it: purchase price, freight, installation, non-recoverable taxes
• Supplier and invoice reference, so the cost traces to a document
• Book depreciation: method, useful life, residual value, accumulated depreciation, net book value
• Tax block, separately, because the tax computation groups assets differently
• Disposal: date, proceeds, and how it left

The two depreciation columns are the line people leave out, and it is the line that costs the most time later. Book depreciation under Schedule II runs asset by asset on useful lives. Tax depreciation runs on blocks at Appendix I rates. If the register only carries one of them, someone rebuilds the other from scratch each year.

The three-way reconciliation

This is the test, and it is worth running yourself before anyone runs it on you.

Register to general ledger. Total cost in the register should equal the gross block in the ledger; total accumulated depreciation should equal the ledger’s accumulated depreciation. Do it per asset class, not just in total, because two errors in opposite directions net to zero and hide each other.

Register to physical verification. Pick a sample, find the assets, confirm the tag, the location and the condition. Then do it in reverse: walk the floor, pick assets at random, and find them in the register. The reverse direction is the one that finds unrecorded assets, and it is the one most often skipped.

Additions and disposals to documents. Every addition should trace to an invoice and an approval. Every disposal should trace to an approval, a gate pass or scrap note, and the receipt of proceeds.

The five discrepancies that recur

1. Assets scrapped but never removed. The machine went years ago; the register still depreciates it. The ledger carries a net book value for something that does not exist, and both book and tax figures are wrong. This is the single most common finding.

2. Capital work in progress that was completed and never transferred. The asset is in use and earning, but it sits in CWIP, so no depreciation has been charged at all. Profit is overstated for as long as it goes unnoticed.

3. Repairs capitalised, or improvements expensed. Both directions occur. The repairs-versus-improvement decision is where these originate, and the register is where they become visible.

4. Date put to use taken from the invoice. A machine invoiced on 20 March and commissioned on 15 April belongs in the following year. Get this wrong and you claim a year of depreciation you were not entitled to, or miss one you were.

5. Untagged assets. Without a physical tag, verification becomes an argument. Three identical laptops in three departments cannot be distinguished, so all three are reported as found even if one is missing.

A worked reconciliation

A small manufacturer, plant and machinery, at 31 March.

Two items, both ordinary, both fixable in an afternoon if found in April and painful if found in October. The compressor also means depreciation was understated for a quarter, so the correction touches the profit and loss account as well as the register.

When the reconciliation will not clear

Three moves, in this order, resolve almost every stubborn difference.

Split it by class before anything else. A ₹3,40,000 total difference is unsearchable. The same difference decomposed into plant ₹2,10,000, furniture nil and computers ₹1,30,000 tells you where to look and often what the cause is.

Compare movements, not balances. If opening balances agreed last year, the error is in this year’s additions, disposals or depreciation, and those are far fewer lines than the whole register.

Check the disposal side twice. Additions leave an invoice trail and tend to be right. Disposals leave a weaker trail, get approved verbally, and are the usual culprit. An asset removed from the ledger but not the register, or the reverse, produces exactly the kind of difference that resists a quick scan.

If a difference still will not clear, write it up rather than forcing a balancing entry. An unexplained ₹40,000 documented honestly is a finding your auditor can work with. The same ₹40,000 buried in a plug is a different conversation.

How often to verify

A full physical verification every year is the ideal and rarely happens outside regulated sectors. A rolling programme that covers every location over two or three years, weighted so that high-value and portable assets are seen more often, is the realistic version and is generally accepted provided the programme is documented and actually followed.

What does not work is verifying only what is convenient, which is usually the assets that were never going to be missing.

Where this fits

• How tax groups the same assets: block of assets
• Which spends belong on the register: capitalise or expense
• The two depreciation columns: income tax vs Companies Act depreciation
• Where this sits in the period-end routine: month-end close checklist
• First principles: the depreciation lesson
• Your own figures: depreciation calculator