There is always a chance, in any companies, that physical fixed assets is unmatched with its accounting book. And this, by the accounting principle and rules, isn’t okay. It should be resolved so that they’re matched. In technical words, the accounting department needs to reconcile its fixed asset record.

There are two possible causes of why fixed asset record is not match with its physical, in majority: (1) fixed assets that are on the books and cannot be located; or (2) fixed assets that are physically there, but not on the books. In most companies, both situations exist.

In the above first case, the fixed asset seemingly is missing but the dollar amount shown on the balance sheet has never been written off—therefore the net worth of the company is overstated. As in the second case, at least in theory, it is impossible for significant pieces of fixed assets to be physically present without a corresponding record on the books of account—after all, is it usual that vendors provide gifts in fixed assets to their customers? Of course, they don’t. So, how to resolve those situations? To come to certain solutions, one would need to understand how those situations could come in to their ways so that he/she can prevent such case from happening at the first place. Read on…