A church uses the modified cash basis for its accounting. Under this method, when it purchases fixed assets, the purchase amount is recorded as an expense (or "disbursement"). However, because the church does not then have a record of fixed assets, it has trouble keeping track of them. What solution would you recommend for this problem?
Because most small to medium-sized churches opt for the modified cash basis of accounting, this can be a common problem. Inaccurate records of fixed assets can lead to unrealized theft, loss due to damage, or absence of a valuation of church assets. For example, the loss of church electronic equipment in a fire may not be covered by insurance if the church cannot provide an accurate record of the value of the assets.
However, this problem is easily remedied. The church treasurer or another independent individual should simply prepare a spreadsheet or other document with details of fixed asset purchases, including original cost, date of purchase, location, whose control the asset is under, and the expected useful life/replacement date. While this is certainly not an exhaustive list, it should provide enough detail to validate insurance claims or help account for fixed assets. Whenever a fixed asset is purchased or disposed of, the record should be updated to reflect the changes.
Another beneficial step may be to create a digital record of fixed assets. The person charged with keeping the records should take either a photo or short video of each asset and store the files in a safe but accessible location. This may prove especially helpful for insurance claims. The final necessary step is a periodic inspection of the assets to verify that they are still in the prescribed location and in good condition. Any discrepancies between the record and the physical inventory should be investigated. This method should facilitate quick recognition of theft or loss and subsequent remediation.