Contractors own expensive things: excavators, mixers, scaffolding, vehicles, generators. These are not ordinary expenses. They are assets, they lose value every year and they move from site to site. If they are not in a register, they are lost, double-counted or forgotten when the books are closed. This guide explains how contractors should account for fixed assets.
What counts as a fixed asset
An item is usually a fixed asset when:
- You expect to use it for more than a year.
- It costs more than your own minimum amount, which you decide with your accountant.
- It is used in the business, not held for sale.
Machinery, vehicles, office equipment and site buildings are typical. Cement bought for a building is not: it is a project cost.
What the asset register records
For every asset, record:
- A description and an asset number.
- The date bought and the cost.
- The site or place where it is used.
- How it is depreciated.
- Its current book value.
Number every asset physically with a tag. A register without tags cannot be checked on site.
Depreciation, in plain words
Depreciation spreads the cost of an asset over the years you use it. A machine bought for Rs 5,000,000 and used for ten years does not cost Rs 5,000,000 in the year you buy it. Each year takes a part, so each year's profit shows a fair share of the cost. The method and the useful life are for your accountant to choose, and the tax rules may differ from the accounting ones.
Moving assets between sites
Contractors move equipment all the time. A tag and a transfer record show where each asset is, and the cost of using it can follow the site that has it. When an asset is sold or scrapped, record the disposal, so it leaves the register and the profit or loss on sale is calculated.
A yearly routine
- Count the assets on site against the register.
- Investigate differences: missing, damaged, not recorded.
- Post depreciation for the period.
- Record disposals and transfers made during the year.
- Review the book values with your accountant.
Common mistakes
- Expensing a machine. The profit in the year of purchase is wrong.
- No tags. Assets cannot be found or counted.
- Forgetting transfers. The register says Site A, the machine is at Site C.
- Keeping fully depreciated assets in use but off the register.
- Not recording the sale. The asset stays on the books after it is gone.
How OneAccounts does it
With the Fixed assets add-on, you keep an asset register, with a depreciation schedule that you can view and print, transfers between locations and disposals recorded as sales. Existing assets can be brought in with an import, so you do not have to type the whole register. The add-on is available for any business type, including construction.
See Construction accounting software and construction accounting software in Pakistan: what to look for.
Frequently asked questions
Can I import my existing asset list?
Yes. The Fixed assets add-on has an import for bringing in an existing register.
What happens when I sell an asset?
You record the sale, the asset leaves the register, and the profit or loss on the sale is worked out.
Can I see the depreciation schedule?
Yes. The schedule shows the depreciation by asset and period, and it can be printed as a PDF.
Does a transfer change the accounts?
A transfer records where the asset is. Your accountant decides how the cost of using it is charged to the site.
Which depreciation method should I use?
That is a decision for your accountant, who knows the accounting and tax rules that apply to you.