XBert Type: Standard
Accounting Software: Xero
Country Restriction: All supported countries
Risk Type: Financial Reporting Risk
Business Function: Fixed Assets
Overview
This XBert checks your fixed asset register against the way an asset has been treated in your accounts. It looks for an asset that is still sitting as a draft in your register, but whose full purchase cost has already been written off in one go to a depreciation account. When this happens, the asset has effectively been expensed instead of being capitalised and depreciated over its life, so your asset register and your accounts no longer agree and your reports can be wrong.
What it does
XBert reads your fixed asset register and the bills you have paid for those assets, then compares them with the journals posted to your depreciation accounts. It works out the date depreciation would normally have been run, based on your most recent depreciation entry, and falls back to the end of your last financial year if no depreciation has been posted yet. It then highlights draft assets where the full purchase amount has been written off to depreciation rather than handled as a proper, registered asset.
How it works
This XBert only runs for organisations that already use fixed assets, so it stays quiet for businesses that do not keep a register. Before it looks at anything, it confirms three things: you have fixed asset types set up, you have at least one registered asset, and you have purchased an asset within the last two years.
Once those conditions are met, XBert looks for an asset that is still a draft in your register, that was bought on a paid bill, and that was purchased before depreciation was last run. It then checks your depreciation accounts and flags the asset when a single journal has written off the whole purchase amount against depreciation, even though the asset has never been finalised and registered. In short, the asset's entire cost has been expensed to depreciation while your register still treats it as an unfinished draft.
XBert deliberately ignores assets that have already been registered, bills that have not yet been paid, and assets bought after the most recent depreciation run, so it only raises an alert when there is a genuine mismatch to act on.
Example/Use Case
Priya runs the books for a small landscaping company. In March the business bought a new ride-on mower for $9,400 on a supplier bill, and the bill was paid. The mower was added to the asset register but left as a draft while Priya was waiting on the warranty paperwork, and she forgot to finalise it. At year end, instead of being capitalised and depreciated over time, the full $9,400 was written off in one journal to a depreciation account. XBert raised this alert because the mower's whole cost had been written off to depreciation while the asset was still a draft. Priya reviewed the journal, capitalised the mower properly, registered it in the asset register, and replaced the one-off write-off with depreciation spread across the asset's expected life. Her asset register and her balance sheet now agree, and depreciation is recorded correctly going forward.
Accounting software
This XBert runs for organisations connected through Xero, using the Xero fixed asset register and the journals posted to your depreciation accounts.
Which countries it supports
This XBert is available across all of XBert's supported countries for organisations that use the Xero fixed asset register. It checks the relationship between your assets and your depreciation, which works the same way regardless of region.
Processes
Business area: Fixed Assets. To resolve this XBert, work through the following steps:
Open your fixed asset register and find the asset shown in the alert, which will still be in a draft state.
Confirm the asset details are correct, including the purchase cost, purchase date, asset type and depreciation method.
Review the journal that has written off the asset's full cost to a depreciation account, and decide whether the asset should instead be capitalised and depreciated over its life.
If the asset should be capitalised, reverse or correct the one-off write-off journal so the cost sits in the right asset account.
Finalise and register the draft asset so it is properly recognised in your register, then let depreciation accrue over its expected life rather than all at once.
Check that the fixed asset and accumulated depreciation balances on your balance sheet reconcile to your fixed asset register.
Once the asset is registered and the depreciation is correct, mark the XBert as resolved.