Is Rental Equipment a Fixed Asset?
Arielle Cox
Fixed assets play an essential role in your rental company’s operations. They can be accounted for in specific, strategic ways that affect your bottom line.
What are Fixed Assets?
Fixed assets are any business assets a company owns and uses for long-term operations. Common examples include buildings, vehicles, machinery, and furniture.
Is Rental Equipment a Fixed Asset?
The short answer is yes, rental equipment is a fixed asset, assuming that you:
- Own it (outright or financed)
- Use it to generate rental income
Keep in mind that fixed assets are typically considered investments in your business. So, a forklift that you rent out to customers would be an investment. However, a few pipes or hoses you sell as ancillary/add-on items would not be considered fixed assets. These items add value to your inventory, but do not depreciate or qualify as an investment piece.
If You Don’t Own the Equipment You Rent Out
If your business is primarily based on re-rentals (e.g., if you rent equipment from another organization and then pass it down to your customers as a temporary fix), those assets would not be considered your property and, therefore, not a fixed asset. (The same applies for equipment you rent from another organization to perform work on your property.) Your accounting team would not treat these machines as fixed assets; the rental fees you pay to obtain those machines would be considered expenses.
At a Glance
If you’re just starting out in the rental industry, you may not be thinking in great detail about how to classify your rental assets. However, as you grow and scale, you may want to become more strategic about your accounting. This may look like developing an in-house accounting team rather than outsourcing to a bookkeeper or adopting an integrated accounting system to manage your financials.
Making Equipment Rental Accounting Easier
A robust accounting solution can help you properly account for your fixed assets. You can track the purchase price and date of each rental asset; manage depreciation on a variety of schedules; and use balance sheets and income statements to evaluate your assets, liabilities, and equity. Your finance team can use this data to assess your financial health and future obligations as you track your performance over time.
See how InTempo’s Integrated Accounting System Can Streamline Your Financials
Need recommendations for how to record rental equipment correctly in your books? Want to deep-dive into your questions about your fixed assets? Our experienced Professional Services team can help you use your InTempo accounting solutions to their fullest potential. Contact us, and we’ll connect you with a member of our team.
