AS | Ankit Sarawagi|Founder, CFOmatrix·July 2026·11 min read | Capex SOP |
- The FAR is non-negotiable at audit. Under CARO 2020 the auditor reports on proper asset records, physical verification and title, so a clean register is the difference between a smooth audit and an adverse comment.
- Capex is approved like any spend: finance raises it, one other person approves per the matrix, and anything above the SHA limit goes to the board.
- Capitalize or expense turns on two tests: useful life over a year, and cost above your capitalization threshold. Set the threshold once and apply it consistently.
- The FAR must reconcile to the physical asset and to the ledger, which is why tagging, location and written down value all sit in it.
- Verify yearly, dispose with approval. Count assets once a year, and never let one leave the floor without a matching disposal entry.
| 8 Steps from capex request to the FAR | 1×/yr Minimum physical verification (CARO 2020) | 6 Core fields every FAR line must carry |
What a Fixed Asset Register Is, and Why Auditors Always Ask
A fixed asset register is the single, complete list of every long-life asset the company owns, laptops, servers, furniture, office equipment, capitalized software, with the detail needed to verify each one. It records, for every asset, what it is, a unique tag, when it was bought, what it cost, where it sits, how it is depreciating, and what it is worth today. In short, the FAR is the bridge between the physical asset in the room and the fixed-asset number on your balance sheet.
Auditors ask for it first because it is where records and reality most easily drift apart. Under CARO 2020 (subject to the current law and to which company it applies), the auditor has to report on whether the company keeps proper records of property, plant and equipment with full particulars and location, whether those assets have been physically verified at reasonable intervals and how any discrepancies were handled, and whether title deeds of immovable property are in the company’s name. A missing or messy FAR is not a small housekeeping gap; it becomes a written comment in the audit report. This SOP is the process that keeps the register clean; the matching capitalization and fixed-asset policy is the rules, and it is one of the operating SOPs in our finance SOPs and controls guide for startups.
The Capex-to-FAR Flow
Every fixed asset the company owns should have entered through the same short path: from a request, through approval, to a line in the register that then depreciates and is eventually retired. Written as a fixed sequence, nothing slips in unapproved and nothing lands on the balance sheet untracked.
Steps 1 to 3 are just your normal spend controls applied to capex: the same two-person approval, the same audit-ready records, the same maker-checker release. Capex is not a special-case free pass; a bigger, strategic asset simply climbs the approval ladder to the board where the SHA or investment agreement sets the threshold. The fixed-asset-specific work, and where startups get it wrong, is steps 4 to 8.
“Capex is not a different animal from any other spend. Every purchase gets approved, and the bigger, strategic ones go to the board at the limit our investment agreement sets, not some number we invented. What is special about a fixed asset is only what happens after you pay: you have to tag it and track it, or it quietly disappears.”
Ankit Sarawagi, from building finance functions inside growing startupsCapitalize or Expense: The Decision That Feeds the FAR
Only capitalized purchases go into the fixed asset register, so this one decision, made at step 4, is what determines what the FAR ever holds. The test is simple and turns on two questions: will the business use it for more than a year, and is its cost above your capitalization threshold. Yes to both means capitalize, add to the FAR, and depreciate. Otherwise it is an expense that goes straight to the profit and loss account.
- Laptops, desktops, servers
- Office furniture and fixtures
- Air conditioners, equipment, machinery
- Leasehold improvements to the office
- Capitalized or developed software above the threshold
- An upgrade that extends an asset’s life
- Stationery and consumables
- Monthly software subscriptions (SaaS)
- Routine repairs and maintenance
- Small-value items below the threshold
- Rent, utilities, internet
- A repair that only keeps an asset running
There is no single legally fixed capitalization figure for companies, so pick a sensible rupee threshold in your accounting policy: below it, expense for simplicity; above it, capitalize and track in the FAR. The value is less important than being consistent: keep the threshold stable year to year so your numbers stay comparable, and remember the real test is useful life and materiality, not just price. Depreciation treatment also differs between the Companies Act and Income Tax rules, so verify the current position for each.
Note one timing point: an asset only starts depreciating once it is put to use. A machine bought but not yet installed, or an office being fitted out, sits as capital work in progress until it is ready, then moves into the FAR and begins depreciating. Getting the capitalize-or-expense call right also protects your margins and your tax position, which is why it links back to disciplined monthly close.
What the Fixed Asset Register Must Contain
A FAR is only useful if anyone can pick a line and reconcile it three ways: to the physical asset in the room, to the ledger, and to the depreciation schedule. That is why each line carries a fixed set of fields. Keep it in your accounting software so cost, depreciation and written down value stay in sync automatically.
| Field | What it records | Why it matters |
| Asset & tag ID | Description, category, unique asset tag | Maps the FAR line to the physical item |
| Purchase date | Date bought and date put to use | Starts depreciation from the right point |
| Cost | Original capitalized value, vendor and invoice ref | Ties to the ledger and the invoice |
| Location & holder | Where it sits and who is assigned it | Makes physical verification possible |
| Depreciation | Method, rate, useful life, accumulated to date | Explains how value is written down |
| WDV & status | Current written down value, active or disposed | Shows what the asset is worth now |
Get the CFOmatrix Fixed Asset Register template: every column above laid out and ready, with the capitalize-or-expense test, depreciation fields and a disposal section built in. Start it on day one and the register grows with the business instead of being rebuilt before each audit.
Physical Verification and Disposal
A register is only trustworthy if someone confirms it against reality. Physical verification is the yearly walk-through that proves each asset in the FAR still exists and is in use, and disposal is the controlled way an asset leaves. CARO 2020 expects a program of verification at reasonable intervals and that discrepancies are dealt with, so a lean team counts assets at least once a year, usually near the financial year end.
The classic finding is an asset gone from the office but still sitting in the register, still depreciating, still on the balance sheet. It happens when a laptop is scrapped or an employee leaves with their machine and no one raises a disposal. Never let an asset leave without a matching entry: no approval and no proof means it is not disposed, it is a hole in your controls, and it is the first thing an auditor pulls on.
Lean Version, Audit Trail, and When to Add a Step
A five-person startup does not need an asset-management department to run this well. It needs the flow above, kept as light as the team allows, and a register that lives in a tool with its own log. As you scale, you add steps, not rework the whole thing.
- Capex request in one line, one approver
- Board approval only above the SHA limit
- FAR kept inside Zoho Books, not a separate sheet
- Simple stick-on asset tags
- One physical verification a year
- A capex budget and a formal capex request form
- Barcode or QR tags and a scan-based count
- Half-yearly verification for laptops and mobile kit
- Location-wise registers once you have multiple offices
- Capital work in progress tracking for fit-outs
The records an auditor or diligence team asks for are produced as a byproduct of running the flow: the capex approval (in the tool or an email saved back), the purchase invoice (in accounts payable), the fixed asset register and depreciation schedule (in Zoho Books, which under India’s MCA rules keeps an edit-log audit trail switched on), the physical verification record, and the disposal approval and proof. Startups get caught not because they skip the work but because they never document it. Approve a purchase or a disposal over email or chat for speed? Save it back into the tool or a monitored email so it stays audit-defensible.
Run capex and the FAR this way and the register is always current, always reconciles, and is ready the moment an auditor or a buyer asks. It is the same principle that runs through the whole series, from disciplined monthly close to being audit-ready every day, and the complete picture is in the finance SOPs and controls pillar guide.
Frequently Asked Questions
What is a fixed asset register?
A fixed asset register (FAR) is the single list of every long-life asset the company owns, such as laptops, servers, furniture, office equipment and capitalized software, with the detail an auditor needs to verify each one. For every asset it records what it is, a unique tag or ID, the purchase date, the original cost, the location and who holds it, the depreciation method and rate, the depreciation charged so far, and the current written down value (WDV). The FAR is what links the physical asset in the room to the fixed-asset figure on your balance sheet. Kept in your accounting software, it updates automatically as you add assets and run depreciation, and it becomes the schedule you hand over at audit and at due diligence.
What must a fixed asset register contain?
At a minimum the FAR should carry, for each asset: a description of the asset, a unique asset tag or ID, the asset category or class, the purchase date, the vendor and invoice reference, the original cost (capitalized value), the location and the person or department it is assigned to, the depreciation method and rate, the accumulated depreciation to date, and the current written down value. Many teams also record the useful life, the date put to use, any capital work in progress until the asset is ready, and a status field for disposals. Those fields let anyone reconcile the register to the ledger and to the physical asset, which is exactly what physical verification and audit both check.
Should I capitalize or expense a purchase?
Capitalize a purchase when it is an asset the business will use for more than a year and its cost is above your capitalization threshold; expense it when it is consumed within the year or falls below the threshold. So a laptop or a server you will use for years is capitalized, added to the fixed asset register and depreciated over its useful life, while stationery, a monthly software subscription, repairs and small-value items are expensed straight to the profit and loss account. Set a clear capitalization threshold in your accounting policy and apply it consistently. A repair that only maintains an asset is an expense, but a cost that improves the asset or extends its life is capitalized and added to the asset’s value.
How often should fixed assets be physically verified?
Fixed assets should be physically verified at least once a year, and CARO 2020 expects the company to have a program of physical verification at reasonable intervals and to deal with any discrepancies found. In practice a lean startup counts assets once a year, usually near the financial year end, by walking through the FAR: locate each tagged asset, confirm it exists and is in working use, note its condition and holder, and flag anything missing, damaged or moved. Any difference between the register and the floor is investigated and either corrected in the FAR with approval or written off through the disposal process. High-movement or high-value items, such as laptops issued to staff, may be checked more often.
How do I dispose of a fixed asset?
Dispose of a fixed asset only with approval, and record it so the register, the ledger and the physical position all agree. The steps are: raise a disposal request for the asset (sold, scrapped, donated or lost), get it approved by the founder or the approver in your matrix, complete the sale or scrapping and collect the proof (a sale invoice, a scrap note or an insurance or loss record), remove the asset from active use, then in the accounting software retire the asset so it stops depreciating, book the profit or loss on disposal against its written down value, and update the FAR status. Never let an asset simply vanish from the floor without a matching entry in the register, because that gap is exactly what an auditor and a diligence team probe.
Do auditors check the fixed asset register?
Yes. The fixed asset register is one of the first schedules a statutory auditor and a due diligence team ask for. Under CARO 2020 the auditor reports on whether the company maintains proper records of property, plant and equipment showing full particulars including quantitative detail and location, whether assets have been physically verified at reasonable intervals and how discrepancies were dealt with, and whether title deeds of immovable property are in the company’s name. The auditor reconciles the FAR to the fixed-asset figure in the accounts, samples assets to verify they exist, and checks additions, depreciation and disposals. Keeping the FAR in accounting software that carries an edit-log audit trail, as India’s MCA rules now require, means those records are ready without a scramble.
What is the capitalization threshold for fixed assets?
The capitalization threshold is the rupee value above which a long-life purchase is recorded as a fixed asset and depreciated, rather than expensed at once. There is no single legally fixed figure for companies, so you set a sensible threshold in your accounting policy and apply it consistently: items below it are expensed for simplicity, items above it are capitalized and tracked in the FAR. Whatever level you choose, document it, keep it stable so year-on-year numbers stay comparable, and remember the test is about materiality and useful life, not just price, so a cheap item used for years may still be capitalized if it matters. Verify the current position under the Companies Act and Income Tax rules, as depreciation treatment differs between them.
This is general educational information for founders, current to mid-2026, drawing on the author’s experience building finance functions inside growing startups, and is not legal, tax or audit advice. CARO 2020 applicability, capitalization thresholds and depreciation rules under the Companies Act and the Income Tax Act change and depend on the company; verify the current position or consult a professional before acting on a specific matter.
Being Audit-Ready Every Day
Finance SOPs and Controls: The Founder’s Guide
AS | Founder, CFOmatrix | Finance Strategy & Equity Compliance CFOmatrix is a knowledge platform focused on how finance actually works inside growing companies. This SOP draws on hands-on experience running lean capex approvals, fixed asset registers, depreciation and physical verification for startup teams. |