Accounting and Bookkeeping
An organization records fixed assets on the books when it purchases items it will use and benefit from for a period of time greater than one year. Before the organization records fixed assets, it should determine the value at which an item qualifies as a fixed asset instead of an expense. Determining the value of a fixed asset is called a "capitalization policy." Typically this value is based on the overall size of the organization. For small nonprofits, an item worth more than $500 to $1,000 is typical for a capitalization threshold.
Fixed assets are broken down into two broad categories:
- real property-typically determined by an appraisal
- collection items
- furniture and equipment- determined by the amount paid to purchase the item