Fixed Assets Interview Ques ons & Answers

1. Explain Fixed Assets End to End process?

2. What are the Key Characteris cs of Fixed Assets?
3. What is the Accoun ng for Fixed Assets?
4. What is Acquisi on?
5. What is Depreciation?
6. What is Amortization?
7. What is Impairment?
8. What is Disposal?
9. What is Put to use?
10. What are Tangible Assets?
11. What are Intangible Assets?
12. What are Scrap sales?
13. What is Leased Assets?
14. What are Self-generated Assets?
15. What is Asset bonding?
16. What is Asset debonding?
17. When do you Capitalise and when Expense it out?
18. What is Asset Master Data?
19. What are Asset Transac ons?
20. What are Deprecia on Pos ngs?
21. What are Fixed Assets?
22. What is CIP Capitaliza on?
23. What is Interna onal Transfer?
24. What are Asset Transfers?
25. What are Asset Re rements?
26. What is Deprecia on Simula on?
27. What is Asset Value Adjustments?
28. What is Asset Tag?
29. What is Fixed Asset Reconcilia on?
30. What is Fixed Asset Month End Close?
31. What is SLA?
32. What Accoun ng So ware used for Fixed Assets process?
33. What are the SAT T Codes used in Fixed Assets?
34. What are the Fixed Asset Journal Entries?
1. Explain Fixed Assets End to End process?

Fixed assets are long-term tangible assets that are used in the produc on of income for a business and
are not expected to be converted into cash within one year of the balance sheet date.

These assets are held for con nued use in the business and are not intended for resale.

Fixed Assets are most commonly referred to as property, plant, and equipment.

The process involves Assets, Capitaliza on, Re rement, Interna onal Transfer, Asset Tag, Journal
Vouchers, Reconcilia on, Month End Close.

2. What are the Key Characteris cs of Fixed Assets?

Tangible: Physical presence is a must.

Long-term Use: Expected to be used in business opera ons for more than one year.

Not for Resale: Acquired for internal use and not for resale as part of normal business opera ons.

Examples of Fixed Assets: Land, Buildings, Machinery and Equipment, Vehicles, Furniture and Fi ngs.

3. What is the Accoun ng for Fixed Assets?

Acquisi on: Ini ally recorded at cost, which includes the purchase price and all costs necessary to get
the asset ready for use (transporta on, installa on, etc.).

Deprecia on: Alloca ng the cost of the asset over its useful life. Common methods include:
Straight-Line Deprecia on: Evenly spreading the cost over the asset's useful life.

Declining Balance: Accelerated deprecia on method where a higher expense is recognized in the early
years.

Units of Produc on: Based on usage or output of the asset.

Impairment: If an asset's carrying amount exceeds its recoverable amount, an impairment loss is
recognized.

Disposal: When an asset is sold or re red, its cost and accumulated deprecia on are removed from
the balance sheet, and any gain or loss on the disposal is recognized in the income statement.

4. What is Acquisi on?

Acquisi on of fixed assets involves the process of obtaining and recording long-term tangible assets
that a business intends to use in its opera ons.

This process is crucial for expanding capacity, enhancing produc vity, and ensuring opera onal
efficiency.
5. What is Depreciation?

Deprecia on is an accoun ng method used to allocate the cost of tangible assets (such as buildings,
machinery, vehicles) over their useful lives.

It represents the decrease in the value of an asset over me due to factors such as wear and tear,
obsolescence, or use.

Key concepts of Deprecia on are Depreciable Assets, Useful Life, Salvage Value and Depreciable Base.

Methods of Deprecia on are Straight Line Method, Declining Balance Method, Sum-of-the-Years'-
Digits Method, Units of Produc on Method.

Deprecia on = Cost of Asset – Residual Value / Useful Life

Deprecia on Journal Entries

1. Ini al Purchase of Asset:

Debit Machinery
Credit Bank

2. Annual Deprecia on (Straight-Line Method):

Debit Deprecia on Expense

Credit Accumulated Deprecia on

6. What is Amortization?

Amortization is a similar concept to depreciation but is specifically used for intangible assets rather
than tangible assets like buildings or machinery.

It refers to the process of spreading out the cost of an intangible asset over its useful life.

Amor za on are most commonly referred to as Patents, Copyrights, Trademark, Software, Franchise,
License, etc.

7. What is Impairment?

Impairment refers to a reduction in the value of an asset on the balance sheet due to one or more
factors that have caused the asset's fair market value to decline below it carrying value (i.e., its book
value).

Impairment can occur for both tangible and intangible assets.

8. What is Disposal?

The disposal of fixed assets refers to the process of removing a long-term tangible asset from a
company's books.
This can occur through sales, retirement, or scrapping of the asset when it is no longer useful or
needed.

Properly accounting for the disposal is important for maintaining accurate financial records.

9. What is Put to use?

Put to use refers to the ac on of u lizing or deploying something for its intended purpose or func on.

Put to use are most commonly referred to as Equipment or Machinery, Resources or Assets, Skills or
Knowledge.

10. What are Tangible Assets?

Tangible assets are physical assets that have a finite monetary value and touched.

Tangible assets are recorded on the balance sheet and can be depreciated over their useful lives.

Tangible assets are most commonly referred to as Property, Plant & Equipment.

11. What are Intangible Assets?

Intangible assets are non-physical assets that lack a physical form but have value to a business due to
the rights and privileges they confer.

These assets represent long-term resources controlled by a company and are used to produce goods
or services, enhance business opera ons, or generate future benefits.

Intangible assets are most commonly referred to as Goodwill, Patents, Copyrights, Trademark, etc.

12. What are Scrap sales?

Scrap sales refer to the revenue generated from selling scrap materials or unusable items that are no
longer needed or useful in the opera ons of a business.

When assets or materials become obsolete, damaged, or surplus to requirements, they may be sold
as scrap to recover some value.

Reasons for Scrap sales are Obsolete or Surplus inventory, Damaged or Detec ve items, Remnants
from produc on process.

13. What is Leased Assets?

Leased assets refer to assets that are used by a lessee (the user of the asset) under a lease agreement
with a lessor (the owner of the asset).

Leasing is a common prac ce where businesses or individuals can use assets without owning them
outright.

Leased assets can include a wide range of items, from equipment and machinery to vehicles and
property.
14. What are Self-generated Assets?

Self-generated assets refer to assets that are created, developed, or generated internally by a business
or entity, rather than acquired from external sources.

These assets are typically produced through the company's own efforts, resources, and activities,
without relying on external purchases or acquisitions.

15. What is Asset bonding?

Asset bonding refers to the process of securing assets or funds through a bond or surety bond, o en
required by government agencies, clients, or stakeholders to guarantee performance or compliance
with specific obliga ons.

16. What is Asset debonding?

Asset debonding or the process of releasing or removing asset bonding arrangements, is less
commonly discussed compared to asset bonding.

However, in certain contexts, asset debonding can refer to the release or termina on of a bond or
surety arrangement that was previously put in place to secure assets or obliga ons.

17. When do you Capitalise and when Expense it out?

Deciding whether to capitalize or expense a cost is a fundamental accoun ng concept that depends
on specific criteria and guidelines established by accoun ng standards (such as Generally Accepted
Accoun ng Principles or GAAP).

The determina on is based on whether a cost meets certain criteria to be recognized as an asset
(capitalized) or should be recognized as an expense (expensed) immediately.

Here's a breakdown of when to capitalize and when to expense costs:

1. Capitaliza on of Costs:

Criteria for Capitaliza on: Costs are capitalized when they meet specific criteria related to future
economic benefits and asset recogni on:

Iden fiable Asset: The cost is directly a ributable to acquiring, construc ng, or developing an
iden fiable asset.

Future Economic Benefits: The cost is expected to generate future economic benefits for the en ty,
such as increased revenues, reduced expenses, or enhanced produc vity.

Measurable Cost: The cost can be reliably measured in monetary terms.

Control and Ownership: The en ty has control over the asset and is likely to derive future benefits
from its use.
Examples of Capitalized Costs:
Property, Plant, and Equipment (PP&E): Costs of acquiring, construc ng, or improving tangible assets
(e.g., buildings, machinery, equipment).

Intangible Assets: Costs of acquiring or developing intangible assets with determinable useful lives
(e.g., patents, copyrights, so ware development costs).

Development Costs: Costs incurred in the development of new products or technologies intended for
sale.

2. Expense Recogni on (Immediate Expensing):

Criteria for Expense Recogni on: Costs are expensed (recognized as expenses on the income
statement) immediately when they do not meet the criteria for capitaliza on:

Consumable Nature: Costs relate to goods or services consumed within the current accoun ng period
with no enduring future benefit.

Rou ne Maintenance: Costs incurred for repairs, maintenance, or minor upgrades that do not
increase the asset's future economic benefits.

Administra ve Costs: General administra ve and opera ng expenses necessary to support ongoing
business opera ons.

Research Costs: Costs incurred in the research phase of new product development (research expenses
are generally expensed un l technological feasibility is established).

Examples of Expensed Costs:

Repair and Maintenance: Rou ne repair and maintenance costs to keep assets in opera ng condi on.

U li es and Rent: Ongoing opera ng expenses such as u lity bills and rent payments.

Salaries and Wages: Compensa on expenses for employees engaged in day-to-day opera ons.

Marke ng and Adver sing: Expenses related to promo onal ac vi es and adver sing campaigns.

3. Judgment and Materiality:

In prac ce, judgment and materiality considera ons also play a role in determining whether to
capitalize or expense a cost. Small, insignificant costs are o en expensed immediately for simplicity
and prac cality, even if they technically meet the criteria for capitaliza on.

4. Accoun ng Policies and Standards:

The decision to capitalize or expense costs may also be influenced by a company's accoun ng policies
and adherence to accoun ng standards.

Companies should apply consistent and appropriate accoun ng treatments based on applicable
guidelines.
18. What is Asset Master Data?

Asset master data refers to a founda onal component of enterprise asset management, encompassing
detailed informa on about each fixed asset owned and u lized by an organiza on.

This data is crucial for effec vely managing assets throughout their lifecycle, from acquisi on to
disposal.

Asset master data typically includes essen al informa on that facilitates tracking, maintenance,
financial repor ng, and decision-making related to fixed assets.

1. Asset Number
2. Serial Number
3. QR Code
4. Asset Name
5. Address
6. Contact details
7. Asset Descrip on
8. Loca on

19. What are Asset Transac ons?

Asset transac ons refer to the various financial and opera onal ac vi es that occur throughout the
lifecycle of fixed assets within an organiza on.

These transac ons involve the acquisi on, deprecia on, disposal, transfer, and maintenance of assets,
and they are recorded in the accoun ng system to ensure accurate financial repor ng and asset
management.

20. What are Deprecia on Pos ngs?

Deprecia on pos ngs refer to the accoun ng entries made to record the periodic deprecia on
expense of fixed assets in an organiza on's financial records.

Deprecia on is the systema c alloca on of the cost of a fixed asset over its useful life to match the
asset's expense with the revenue it generates.

Deprecia on pos ngs are essen al for accurately reflec ng the decreasing value of assets on the
balance sheet and matching expenses with the periods in which assets are used.

21. What are Fixed Assets?

Fixed assets, also known as non-current or long-term assets, are tangible resources owned by a
business that are used in its opera ons to generate income and are not expected to be converted into
cash within a year.

They are essen al for a company’s long-term produc vity and capacity to operate.

22. What is CIP Capitaliza on?

Construc on in Progress (CIP) refers to the accoun ng treatment of expenses incurred for the
construc on of fixed assets that are not yet complete.

These expenses are capitalized as CIP on the balance sheet and are not depreciated un l the asset is
placed in service and reclassified as a fixed asset.
23. What is Interna onal Transfer?

Interna onal transfers in fixed assets involve the movement or realloca on of tangible long-term
assets across borders, typically between subsidiaries of mul na onal corpora ons or during
interna onal mergers and acquisi ons.

These transfers are complex and require careful considera on of legal, tax, accoun ng, and logis cal
issues.

24. What are Asset Transfers?

Asset transfers refer to the movement of fixed assets from one loca on, department, or en ty to
another within an organiza on.

These transfers involve upda ng asset records to reflect the change in ownership, responsibility, or
physical loca on of the assets.

Asset transfers are essen al for maintaining accurate asset management and financial repor ng.

25. What are Asset Re rements?

Asset re rement refers to the process of removing a fixed asset from ac ve use within an organiza on,
typically due to obsolescence, damage, or the end of its useful life.

Asset re rement involves recording the disposal or re rement of the asset in the accoun ng records
and upda ng asset registers to reflect the change in asset status.

26. What is Deprecia on Simula on?

Deprecia on simula on involves using financial models or so ware tools to forecast and analyse the
deprecia on expenses and impact on asset values over me based on different deprecia on methods
and parameters.

This simula on helps organiza ons make informed decisions regarding asset management, budge ng,
and financial planning.

27. What is Asset Value Adjustments?

Asset value adjustments refer to changes made to the recorded value of fixed assets on an
organiza on's balance sheet.

These adjustments can occur for various reasons, such as changes in asset values due to market
condi ons, impairment assessments, revalua ons, or accoun ng policy changes.

Asset value adjustments are important for ensuring the accuracy of financial statements and reflec ng
the true economic value of assets.

28. What is Asset Tag?

Asset Tag, also known as an asset label or asset s cker, is a physical label or iden fica on tag affixed
to a fixed asset to uniquely iden fy and track the asset throughout its lifecycle.

Asset tagging is a common prac ce in asset management to improve visibility, control, and
accountability over organiza onal assets.
Asset tags contain unique iden fiers such as serial numbers, barcodes, QR codes, or RFID (Radio
Frequency Iden fica on) tags that enable quick and accurate iden fica on of individual assets.

29. What is Fixed Asset Reconcilia on?

Fixed Asset Reconcilia on process involves comparing the recorded balances and details of fixed assets
in the accoun ng records (such as the fixed asset register) with the physical assets actually present
and in use by the organiza on.

This process helps ensure the accuracy and integrity of fixed asset records, iden fy discrepancies or
errors, and take correc ve ac ons as needed.

Documents used for Fixed Asset Reconcilia on are fixed asset register, asset descrip ons, iden fica on
numbers, acquisi on dates, costs, accumulated deprecia on, and disposal records.

30. What is Fixed Asset Month End Close?

Fixed Asset Month End Close process for fixed assets involves comple ng various accoun ng tasks to
ensure accurate financial repor ng and management of fixed asset records at the end of each
accoun ng period.

This process is cri cal for maintaining the integrity of fixed asset data and complying with accoun ng
standards.

MEC Ac vi es

1. Review and Update Asset Register

2. Update Addi ons and Disposals
3. Verify Asset Details
4. Run Deprecia on Calcula on
5. Review Deprecia on Run
6. Reconcilia on of Fixed Asset Subledger
7. Resolve Reconcilia on Issues
8. Assess Asset Impairment
9. Evaluate Asset Revalua on
10. Update Asset Register
11. Update Deprecia on schedules
12. Update Asset Addi ons
13. Update Asset Disposals
14. Update Impairment Analyses

31. What is SLA?

SLA stands for Service Level Agreement.

It is a formal contract or agreement between a service provider and a customer that defines the level
of service expected from the provider.

The Turn Around Time (TAT) for Fixed Assets documents to be processed within 2 Business Working
Days.
32. What Accoun ng So ware used for Fixed Assets process?

SAP
Net Suite
Oracle

33. What are the SAT T Codes used in Fixed Assets?

Asset Master Data (AS01, AS02, AS03):

AS01: Create Asset Master Record
AS02: Change Asset Master Record
AS03: Display Asset Master Record

Asset Transac ons (F-90, ABZON, ABZU):

F-90: Acquisi on from Purchase w/Automa c Offse ng Account
ABZON: Acquisi on from Purchase w/ Offse ng Entry
ABZU: Acquisi on from In-House Produc on

Deprecia on Pos ngs (AFAB, AFABN, AFABW):

AFAB: Post Deprecia on
AFABN: Deprecia on Run: Manual
AFABW: Deprecia on Run: Write-Up

Asset Transfers (ABUM, ABT1N, ABT1):

ABUM: Transfer within Company Code
ABT1N: Transfer within Company Code (New Asset Number)
ABT1: Transfer within and between Company Codes

Re rements (ABAV, ABAON, ABAVN):

ABAV: Re rement with Revenue
ABAON: Asset Re rement by Scrapping
ABAVN: Asset Re rement without Customer

Asset Reports and Lis ngs (AW01N, S_ALR_87011963, S_ALR_87011964):

AW01N: Asset Explorer
S_ALR_87011963: Asset Balances
S_ALR_87011964: Asset History Sheet

Deprecia on Simula on (AS100):

AS100: Deprecia on Simula on

Asset Value Adjustments (ABAA):

ABAA: Unplanned Deprecia on

Asset Mass Changes (AS92, AS91):

AS92: Mass Re rement
AS91: Mass Addi on

Asset History Sheet (AW01):

AW01: Asset History Sheet
34. What are the Fixed Asset Journal Entries?

Acquisi on of Fixed Assets

Debit Fixed Assets

Credit Cash

Deprecia on Expense

Debit Deprecia on Expense

Credit Accumulated Deprecia on

Profit on sale of Furniture

Debit Bank
Debit Accumulated Deprecia on
Credit Furniture
Credit Gain on sale of Furniture

Disposal of Fixed Assets

Debit Accumulated Deprecia on

Debit Equipment
Credit Loss/Gain on Disposal

Revalua on of Fixed Assets

Debit Equipment
Credit Revalua on Surplus/Deficit