Xero’s fixed asset register is one of the better things in the product and one of the least used. The usual pattern is a long list of draft assets nobody registered, depreciation that has never been run, and a year-end where the accountant posts one journal to cover twelve months of it.
Assets purchased in Xero arrive in the register as drafts and do nothing until they are registered with a type, a start date and a depreciation method. Depreciation then has to be run as a separate step each period. Neither happens automatically, which is why most registers sit empty while the balance sheet says otherwise.
Register full of drafts and depreciation never run? WhatsApp us and we will tell you what it takes to bring it current.
Quick Summary
| Stage | What happens | What you must do |
| Purchase coded to a fixed asset account | Appears in Xero as a draft asset | Nothing yet |
| Draft asset | Sits there indefinitely | Register it with type, date and method |
| Registered asset | Ready to depreciate | Run depreciation each period |
| Depreciation | Posts to the ledger | Run it, it is not automatic |
| Disposal | Needs handling in the register | Use Dispose, not a journal |
💡 TaxKitab Tip Run depreciation monthly rather than once at year end, even though both produce the same annual figure. Monthly means your profit and loss is comparable from one month to the next instead of carrying a single large charge in March that makes the year look nothing like it actually was. It also means an asset entered incorrectly is caught in the month it was entered rather than eleven months later, when correcting it means reversing and reposting a year of entries.
How an Asset Gets There
When a purchase is coded to an account marked as a fixed asset account, Xero creates a draft asset automatically.
A draft is a placeholder. It carries the cost from the transaction and nothing else — no type, no depreciation method, no start date. It will sit as a draft for years if nobody touches it.
The balance sheet, meanwhile, shows the asset at cost because the purchase was posted. So the accounts look fine while the register is empty, which is exactly why this goes unnoticed.
Setting Up Asset Types First
Before registering anything, set up asset types. A type carries the default depreciation method, rate and the accounts that depreciation posts to.
Doing this first means registering an asset becomes a thirty-second job rather than a set of decisions each time. Doing it later means going back through everything already registered.
Typical types for a small business: office equipment, computer equipment, furniture and fittings, plant and machinery, motor vehicles. Keep the list short — a type per asset defeats the purpose.
Each type needs the depreciation accounts configured, and those have to exist in your chart of accounts first.
Registering an Asset
Open the draft, assign the type, confirm the cost, set the depreciation start date, and register it.
The start date is the one that matters. It should be when the asset was available for use, which is not always the invoice date — equipment bought in March and installed in May starts depreciating in May.
Where the type’s default method or rate does not fit a particular asset, override it on that asset rather than changing the type for everything.
Running Depreciation
A separate step. Nothing depreciates until you run it.
Xero runs depreciation up to a date you choose and posts the entries. It cannot be run partially — it processes every registered asset up to that date.
The practical discipline is to run it as part of month-end close, after new assets have been registered. Running it before registering the month’s additions means those assets miss a period, and catching up later means a rollback.
Which brings up the main constraint: depreciation can be rolled back, but doing so affects every asset in the period, not just the one you want to fix. Register first, then run.
Disposals
Use the Dispose function on the asset rather than posting a journal.
Disposal in the register handles the removal of cost and accumulated depreciation and calculates the gain or loss on sale. A manual journal does part of this and leaves the asset sitting in the register as though you still own it.
Where an asset is scrapped rather than sold, it is still a disposal at nil proceeds. Assets that were thrown away two years ago and never disposed of in the system are extremely common.
Bringing a Neglected Register Current
Work in this order.
Set up the asset types and their accounts. Go through the draft list and register everything, with correct start dates. Compare the register total against the fixed asset balances on the balance sheet, because differences at this point are usually assets posted to the wrong account or disposals never recorded. Run depreciation forward from the correct start date. Then reconcile the accumulated depreciation in the register against the ledger.
Where depreciation was previously posted by manual journal, those journals have to be reversed or the charge is duplicated. This is the step that gets missed and it is the reason the numbers do not agree afterwards.
For Businesses Reporting Across Jurisdictions
Depreciation for accounting and depreciation for tax are not the same thing in most jurisdictions, and the register reflects the accounting treatment.
Keep the tax computation separate rather than trying to make the register serve both — a point that comes up in most outsourced accounting engagements with a foreign parent. Forcing one set of rates to satisfy two frameworks produces a register that is wrong for both purposes.
Frequently Asked Questions
Why are my assets stuck as drafts? Because nothing registers them automatically. A draft is created from the purchase and stays a draft until someone assigns a type and start date.
Does Xero run depreciation automatically? No. It is a manual step each period, and nothing depreciates until it is run.
Can I run depreciation for one asset only? No. It processes every registered asset up to the date you choose.
I ran depreciation before registering this month’s assets. What now? Register them and either run forward from their start date, or roll back and re-run. Rollback affects the whole period, so check what else is in it first.
How do I remove an asset I no longer own? Use the Dispose function, including where it was scrapped at nil proceeds. A journal leaves the asset in the register.
We have been posting depreciation by journal. Can we switch? Yes, but the existing journals have to be reversed for any period the register will now cover, or the charge is counted twice.
References
- Xero documentation on fixed assets, asset types, depreciation and disposal
- Accounting standards on property, plant and equipment and depreciation
⚠️ Available features, depreciation methods and rollback behaviour differ by Xero plan and region and change with releases. Depreciation rates for tax purposes are set by local law and differ from accounting rates. Check both for your own position.
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