Final answer:
The fixed assets account needs to be analyzed to ensure all fixed assets are properly capitalized. A T-account, which separates the assets from liabilities and net worth, aids in this process. It is essential to balance the T-account and verify that assets equal liabilities plus net worth.
Step-by-step explanation:
To ensure that all fixed assets have been properly capitalized, the account that needs to be analyzed is the fixed assets account on the balance sheet. When analyzing this account, one must scrutinize each individual asset to make sure it meets the criteria for capitalization, which typically includes costs that are not routine or incidental, but rather necessary to prepare the asset for its intended use. Such costs can include the purchase price, shipping fees, installation costs, and other expenses directly tied to bringing the asset into operational condition.
Within the accounting framework, the use of a T-account can help in visualizing and balancing these transactions. A T-account separates a firm's assets and liabilities, with assets on the left and liabilities plus net worth on the right. Whenever a fixed asset is acquired, the value of the asset will be recorded on the left side (debit) of the T-account, and the right side (credit) will reflect the corresponding capital increase, either from cash, loans, or other forms of financing. If the asset has not been capitalized, there would be a discrepancy in the balance of the T-account. A properly balanced T-account also aids in ensuring that the overall accounting equation, where assets equal liabilities plus net worth, holds true.