Process Narrative

When the branch manager decides to purchase a fixed asset, a decision is prompted whether
the old asset is to be replaced or not. If Yes, a purchase request form and asset disposal form is
generated. Otherwise, only purchase request form is generated. After this, approval from home
office is seeked.

Fixed Asset acquisition

If purchase request is approved, a purchase order generated and sent to the supplier. The
supplier will then send the equipment and the invoice. The branch manager receives the
equipment wand and generates two copies of receiving reports to be sent to the accounts
payable department and fixed asset department. On the other hand, if purchase request is not
approved, no action is taken.
After getting the receiving report, the accounts payable department will match the form with the
sales invoice from the supplier. If the forms dont match, the home office should be informed.
Otherwise, a liability shall be recorded in the general ledger. The treasury department creates
an open voucher from the liability recorder and disburses cash. After disbursement, the voucher
is canceled and a closed voucher is created. The closed voucher is then sent to the accounts
payable department along with a copy of the cash disbursement voucher created from the
disbursement of cash for them to record payment and file the closed voucher. The other copy of
the cash disbursement voucher is retained by the treasury department.
From the receiving report sent by the branch manager, the fixed asset department records the
asset and depreciates it accordingly. It is then posted to the general ledger maintained by the
accounts payable department and recorded to the fixed asset file under the fixed asset
department. The same is done with the cash disbursement voucher received from the treasury
department.
Disposal of Old asset
The asset disposal request form is sent to the home office for approval.. When disposal request
form is approved, the fixed asset department shall determine the book value of the asset to be
disposed. The fair market value is compared with the carrying amount to determine whether
impairment will be recognized. The asset is then removed from the fixed assets file and
recorded in the general ledger maintained by the accounts payable department. On the other
hand, If asset disposal request form is not approved, no action is taken.