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Fixed asset reconciliation in India combines three matches: FA register to GL book value, depreciation schedule to Companies Act Schedule II useful-life rates, and physical verification to the register. GST ITC on capital goods adds a fourth — matching GSTR-2B and respecting Section 17(5) and Rule 43 reversals.
Match each asset line against GL by asset code, against the depreciation schedule by class and useful life, and against the physical verification sheet by asset tag. Run Rule 43 proportional reversal for mixed-use assets and flag Section 17(5) blocked ITC. Treat additions and disposals as a separate sub-ledger reconciled to capex approvals and disposal memos.
Asset-class-to-useful-life mapping, WDV and SLM method flags per class, capex approval linkage, and blocked-ITC categories per Section 17(5).
Reconciled FA register tying to GL, a depreciation schedule compliant with Schedule II, a physical verification variance report, and an auditor-ready capital-goods ITC working paper.
A manufacturing company capitalises ₹4 crore in plant and machinery during the year. Three months after purchase, the plant manager requests a replacement part for a machine that, according to the FA register, was scrapped two years ago. Investigation reveals that the scrapping was approved but never posted — the machine is still active, still being depreciated, and the disposal proceeds were deposited to a miscellaneous income account rather than being applied against the net book value.
This is a fixed asset reconciliation failure with three simultaneous consequences: overstated asset value, incorrect depreciation, and understated disposal gain.
FA Register vs Book Value Reconciliation
The FA register is the subsidiary ledger for fixed assets — a detailed listing of each asset, its cost, accumulated depreciation, and net book value. The general ledger FA account is the control account — its balance should equal the total of all asset net book values in the register.
Reconciling the two confirms that no entries have been posted to the GL account without a corresponding register entry, and vice versa.
| FA register | GL account | Reconciliation check |
|---|---|---|
| Total gross block | FA gross block GL | Must agree — addition by addition |
| Total accumulated depreciation | Accumulated depreciation GL | Must agree — year by year |
| Total net block | Net block GL | Must agree — derived from above |
| Disposals for the period | Disposal GL entries | Must agree — asset-by-asset |
Depreciation Schedule Matching
Schedule II Under the Companies Act
Schedule II prescribes useful lives for asset classes — not depreciation rates directly. The depreciation rate is derived from the useful life and the choice of method (WDV or SLM).
For example, computers and data processing units have a useful life of 3 years under Schedule II. Under SLM: 33.33% per year. Under WDV: the rate is higher in early years and lower later.
The depreciation charge must be reconciled to:
- The opening net book value of each asset
- The applicable rate per the method chosen for that asset class
- The depreciation charge in the P&L
Any difference between the schedule and the P&L charge is an error — either in the rate applied or in the asset classification.
Addition and Disposal Entries
Additions
Every asset addition must be supported by: purchase invoice with GSTIN and invoice number (for ITC claim), capital expenditure approval, and the asset identification number assigned in the FA register.
The date of capitalisation (when the asset is added to the register) determines: the start of depreciation, the period of ITC claim in GSTR-2B, and the GST input tax eligibility.
GST ITC on Capital Assets
GST ITC on capital goods is generally available in the year of purchase, subject to: the asset appearing in GSTR-2B, the ITC not being blocked under Section 17(5), and the asset being used for taxable supplies.
If the asset is used for both taxable and exempt supplies, proportional ITC must be reversed under Rule 43 of the CGST Rules — calculated at 1/60th of the total ITC per month for the period of use for exempt supplies.
Physical Verification Discrepancy Handling
Physical verification is the external check that the FA register is accurate. Best practice is annual physical verification for high-value assets and biennial for others.
Discrepancies found:
- Asset in register, not found physically: Investigate — determine whether disposed of (write off), stolen (FIR + insurance claim), or relocated (update location in register)
- Asset found, not in register: Verify — determine whether expensed item above capitalisation threshold (capitalise retrospectively), or addition not yet posted (post and capitalise)
WDV vs SLM Reconciliation
If the company applies different depreciation methods to different asset classes (SLM for buildings, WDV for plant and machinery), the reconciliation must confirm that no asset has been switched from one method to the other without proper disclosure under Ind AS 8 (accounting policy changes).
Reconciliation software India that maintains a fixed asset module tracks additions, disposals, depreciation, and physical verification matches in an auditable format — reducing the manual work of FA schedule preparation for statutory audit.
Bank reconciliation software that links capital expenditure bank payments to FA additions by UTR or payment reference provides an end-to-end trace from payment to capitalisation.
The Institute of Chartered Accountants of India publishes the Ind AS 16 guidance and the Schedule II useful life table that governs depreciation calculations for statutory compliance.