The general make up of fixed asset account is: opening balance, additional adjustment of profit or loss on sale and on account of depreciation.
Every entry which does not conform to this pattern should be inquired into it should be observed that expenses on current repairs have not been conversely those on additions to or renewal of assets have not been charged. It should be verified that purchase of assets or addition to them have been the
sanction of directors or partners, as the case may be, also where the initially the whole of the undertaking has been sold, in the case of a come under the sanction of shareholders at general meeting.

Where the entire undertaking of a business had been taken over, the value placed by the management on different assets and particularly the amount debited to Goodwill Account or that credited to Capital Reserve Account, should be verified by reference to the vendors’ agreement. The debit to the Goodwill Account would be necessary only when the amount paid for the business is in excess of the total value of asset taken over reduced by the amount of liabilities taken over. On the other hand, if the last mentioned amount is in excess, it shall be credited to the Capital Reserve Account. The values of various current assets held at the close of the year and their composition should be compared with those held at the end of the previous year and if there is material change in their amounts or the basis of their valuation, the reasons thereof should be ascertained. If they appear to be unduly large, e.g., when the value of stock in hand has doubled but the sales have not increased, the fact should be brought to the notice of the management. It should be also verified that interest at reasonable rate has been charged on loans advanced to directors, managers, and all concerned; also that loans were advanced under appropriate authority either that of directors or shareholders. The balance in the Suspense Account, if any, should be analysed and the constituent amount included under appropriate heads of the Balance Sheet. Finally, it should be confirmed that assets have been properly grouped under different heads for purpose of disclosure in the Balance Sheet and the method of valuation of each asset is shown as required by the form in which the Balance Sheet is required to be presented.

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