Lecture Notes: Fixed Assets

Introduction

• Speaker: Alex, Product Manager at Apple
• Topic: Fixed assets and how to track them for your organization
• Objective: Provide a basic understanding of fixed assets, with more detailed content in future videos

Understanding Fixed Assets

• Fixed Asset: An item owned by the organization whose cost is spread out over multiple years
• Balance Sheet: Fixed assets need to be tracked here

Key Considerations

1. Capitalization Policy

   • Definition: Policy that determines what qualifies as a fixed asset based on its value
   • Example: Items over $2000 qualify as fixed assets; items under $2000 (e.g., $20 pens) are considered expenses

2. Depreciable Life Policy

   • Definition: Policy that determines the number of years over which a fixed asset will depreciate
   • Example: Fixed assets might depreciate over 5 years

Depreciation Example

• Item: Computer
• Cost: $2000
• Depreciation Period: 5 years
• Depreciation Method: Straight-line depreciation (same amount each year)
  • Yearly Depreciation Expense: $2000 / 5 = $400
  • Depreciation Schedule:
    • Year 1: $400
    • Year 2: $400
    • Year 3: $400
    • Year 4: $400
    • Year 5: $400
• Outcome: After 5 years, the item is depreciated to zero, spreading the expense and aiding with tax purposes

Future Content

• Detailed discussion on:
  • Capitalization Policy
  • Depreciable Life
  • Different types of fixed assets and respective depreciation periods

Conclusion

• Next Steps: More detailed videos on related topics
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