Depreciation Book
OBJECTIVE
The Depreciation Book function is used to define the assets to be depreciated. The calculation options are used to generate the depreciation accounting entries for these assets.
Generally, these fixed assets will also be subjected to the depreciation calculation but it is also possible to create fixed assets that are entirely depreciated or that do not require a depreciation calculation, in order to display them in the depreciation plan.
It is also through this window that different adjustments can be performed in the fixed assets file:
- Acquiring preexisting fixed assets
- Partial disposals of existing fixed assets
- Complete disposal of a fixed asset
- Suspending the depreciation calculation during one or more periods
PREREQUISITEs
- Project Management
- Define Depreciation Categories
- Define Depreciation Groups
- Define Status Codes
- Define Depreciation Rates
Steps
maestro* > Accounting > Financial Management > Depreciation > Depreciation Book |
Creating a Depreciation Transaction
- Enter the required information:
Field
Description
Type
Number
Number of the depreciable asset. 20 alphanumerical characters.
Description
Description that identifies the asset. Appears on the depreciation plan and on most Deprecation reports and screens.
Status
Status: Active or Inactive. Only depreciations with the Active status are taken into account when calculation depreciations.
Purch Date
Date of purchase.
Year
Year of the asset. Appears on the depreciation plan and mainly applies to equipment.
Acquisition Cost
Acquisition cost.
Model
Model of the asset. Mainly applies to equipment.
Serial Number
Serial number. Mainly applies to equipment.
Available Years
Financial years available for calculating the depreciation. For each of these years, the depreciation calculation process in relation to the fixed asset selected is displayed in the Status list.
Status
Status of the financial year. Avalaible values:
- Enter the required information in the Fixed Assets tab. The information displayed in this tab us used to enter data and settings in relation to the depreciation calculation for the current fixed asset, as well as display the progress status of the depreciation calculation for the selected year.
- The Details section contains the basic information linked to the depreciation calculation or calculated depreciation:
Field
Description
Calc Code
Code that identifies the calculation method of the depreciation to be applied to the fixed assets, as defined in the Define Depreciation Rates option.
Category
Depreciation category from the Define Depreciation Categories option. The default allocation indicated in category management will be displayed in the Allocation tab, if entered.
The category can be used to group fixed assets in the depreciation plan. The category is also a criteria to select fixed assets for the monthly depreciation calculation.
Group
Depreciation group from the Define Depreciation Groups option. The default allocation indicated in category management will be displayed in the Allocation tab, if entered.
The group can be used to group fixed assets in the depreciation plan.
Status
Depreciation status from the Define Status Codes option.
- Straight-Line Depreciation, Declining Balance Depreciation, or Hourly Depreciation sections:
Straight-Line Depreciation
Declining Balance Depreciation
Hourly Depreciation
- The Hourly Depreciation panel contains the information specific to the hourly depreciation calculation mode. It is displayed if the depreciation mode indicated in the selected calculation code is Hourly.
Field
Description
Value
Original accounting value of the fixed asset. It is generally the purchase cost of the asset, excluding taxes.
Residual
Residual value of the fixed asset, once completely depreciated.
Net
Value to depreciate, corresponding to the value of the fixed asset minus its residual value. Thos field is displayed for informational purposes only and cannot be modified.
Number of hours anticipated
Number of hours representing the duration of use of the asset.
Hourly Dep. Rate
Depreciation amount that will apply to every hour the fixed asset is used. It is calculated by dividing the net value of the asset by the number of planned hours. This field is displayed for informational purposes only and cannot be modified.
Year Hours
Number of hours for which the depreciation was calculated for this fixed asset, for the current year. This field is displayed for informational purposes only and cannot be modified.
Hours to date
Number of hours for which the depreciation was calculated for this fixed asset, since the beginning of the depreciation calculation. This field is displayed for informational purposes only and cannot be modified.
The Hour or Hourly term can also be represented as any unit of use of a fixed asset. For example, we could calculate the depreciation accourding to the number of kilometers covered by a car or by the number of tons produced by a crusher.
The hours and other usage units are derived from the compilation of production quantities entered or generated in connection with the project corresponding to the asset number. If a specific group was entered in the Hourly Depreciation section of the general settings, only the production transactions linked to this group will be taken in to account.
- The Fixed Asset section contains the information related to the evolution of the fixed asset value:
Field
Description
Opening Balance
Value of the fixed asset at the beginning of the financial year, updated at the beginning of every year, and used to calculate the annual depreciation to distribute according to the available periods and adjusted payments or not.
This amount must be zero if the fixed asset was acquired during the year. The balance automatically carries over from one year to the next.
NOTE: The balance must be indicated for the first depreciation year.
Current Year Additions
Grid containing the acquisitions made related to the asset during the indicated financial year. The acquisitions indicated here increase the value of the fixed asset and therefore the value that will be depreciated during the year.
For example, if we spend $20,000 to replace the engine of an excavator, this will increase the life and value of the piece of equipment. SInce this engine will have a longer life, we can process this expense as an asset acquisition (excavator) and therefore increase its value, as well as the depreciation amount that will be calculated every month.
Complete the following fields in the grid:
Date
The value to depreciate will be modified starting the period corresponding to the date entered.
It is not possible to enter a date that is not in the indicated year, nor in a period for which the depreciation was already performed.
Amount
Value at acquisition. This amount will be added to the value to depreciate, starting on the indicated date.
Depreciation
Depreciation amount that has already been calculated in the acquisition amount indicated in the previous field, during the acquisition.
This amount will be added to the depreciation already calculated for this piece of equipment, which will come increase the fixed asset depreciated amount at the end of the year, and therefore decrease its net value.
Current Year Disposals
Grid containing the disposals performed, related to the fixed asset, during the indicated financial year. The disposals indicated here can be resold, we can therefore process the removal of the original engine, like a disposal on fixed asset and therefore decrease its value and the depreciation amount that will be calculated every month.
For example, if we replace the engine of an excavator for a more perfoming one, but the original engine is still good and can be sold, we can therefore process the removal of the original engine as a fixed asset disposal and therefore educe its value and, consequently, the depreciation amount that will be calculated every month.
During the final disposal of an asset, for the system to automatically calculate the disposal proit and loss, complete the following fields:
Date
This is the disposal date. The value to depreciate will be modified from the period corresponding to the date entered.
It is not possible to enter a date that is not part of the indicated year, nor corresponding to a period for which the depreciation calculation has already been performed.
Amount
Disposal value. This amount will be reduced from the depreciation value, from the indicated date.
Depreciation
Depreciation amount already calculated on the disposal amount indicated in the previous field, when acquired.
This amount will be added to the total depreciation amount on disposals, which will come decrease the fixed asset depreciated amount at the end of the year, and therefore inscrease its net value.
Closing Balance
Value of the fixed asset at the end of the indicated financial year. This value is calculated according to this formula:
Balance at the end of the year = Balance the the beginning of the year + Sum of yearly acquisitions - sum of yearly disposals
This balance is automatically carried forward to the Opening Balance field of the next year when calculating the annual depreciation. This field is displayed for informational purposes only and cannot be modified.
- The Depreciation section contains information concerning the evolution of the fixed asset depreciation value. We also find the information concerning the final disposal of the fixed asset:
Field
Description
Opening Balance
Total amount of the fixed asset at the beginning of the year.
This amount can be zero if the fixed asset is in its first depreciation year. This amount can also be entered manually if the depreciation calculation must start with an already depreciated value and if this value was not entered in the Additions table during the year.
The balance is automatically carried over from one year to the other.
Total Depreciation on Additions
Amount already depreciation for acquisitions made during the year. This amount corresponds to the sum of amounts displayed in the Depreciation column of the Acquisition table during the year.
This field is displayed for informational purposes only and cannot be modified.
Depreciation for this Year
Depreciation amount that remains to be taken for the current year. This field is only displayed when the chosen calculation method is Linear or Declining. This amount is calculated by the software, taking into account the value to depreciate, the depreciation method, and the sums already depreciated to date.
This field is used for informational purposes only and cannot be directly modified. However, it is possible to influence the calculation in the Advanced Calculation window, available by clicking on the button to the right of this field.
Remaining Periods to Depreciate
Number of periods left to depreciate in the current year.
The number of periods left to depreciate is calculated using the number of periods checked in the Linear Depreciation or Declining Depreciation pannels from which have been substracted the number of periods for which the depreciation was already accounted (information displayed in the Depreciation pannel).
The value displayed in this field is also displayed in a field with the same name, in the Depreciation pannel. This field is displayed for informational purposes only and cannot be modified.
Depreciation Amount by Period
Depreciation amount to take in each period that remains to be depreciated for the current year.
This field is calculated by dividing This year's remaining depreciation amount by the Number of Periods that remain to depreciate.
The value displayed in this field is also displayed in a dield with the same name, in the Depreciation pannel. This field is displayed for informational purposes only and cannot be modified.
Total Depreciation on Disposals
Amount depreciated on the disposals performed during the year.
This amount corresponds to the sum of the amounts displayed in the Depreciation column of the Current Year Disposals table. This field is displayed for informational purposes only and cannot be modified.
Closing Balance
Total depreciated value of the asset.
This amount can be zero if the asset is in its first depreciation year. This amount is calculated using the following equation:
Balance at the end of the year = Balance at the beginning of the year + Total depreciation on acquisitions + Total depreciation for the year - Total depreciation on disposals
At the end of the financial year, during the annual depreciation calculation, the balance is automatically carried over to the Opening Balance of the next depreciation year. This field is displayed for informational purposes only and cannot be modified.
Net Book Value
Current accounting value of the asset. This amount is calculated according to the following equation:
Net value = Asset balance at the end of the year - Depreciation balance at the end of the year
Disposal Date
Accounting date in which the asset was sold or definitely stopped being used.
Disposal Amount
Amount obtained when disposing of the asset, if it was sold.
Profit or Loss on Disposal
Profit or loss amount calculated upon the disposal of a fixed asset. This amount is calculated according to the following equation:
Profit or loss on the disposal = Disposed product - Total disposal amount during the current year + Total depreciation on disposals
NOTE: The Total Depreciation on Disposals corresponds to the sum of amounts entered in the Depreciation column of the Current Year Disposals table.
For the Profit or Loss on Disposal to be calculated, the following conditions must be met:
- The asset's balance at the end of the year must display zero. This can be done by adding a line in the Current Year Disposal table and by indicating the value in the Amount column, equal to the end of year balance.
- The depreciation amount at the end of the year must display zero. This can be done by adding a line in the Current Year Disposal table, and by indicating a value in the Depreciation column, equal to the end of year amount.
When the Profit or Loss on Disposal is calculated and displayed, the button is displayed to the right of the amount and gives access to a window in which the calculation is detailed.
- The Current Year's Depreciation section allows to view the amounts calculated for each period.
- Enter the required information in the Allocation tab:
- Project section:
- A Project, an Activity, and a Group are required, for both the Expense part and the Accumulated Depreciation part.
- During the transfer of depreciation transactions, a Project Transfer type transaction will be generated, after charging the values to projects in question.
- A journal entry will also be generated, during the transfer of the Project Transaction.
- If the asset has an Equipment type, it is logical that the project to which the depreciation will be charged is the same as the project representing the asset.
- The Calculated Value fields allow to see the default values from the categories and groups.
- When the Project choice is activated, it is acceptable that certain default values come from the Categories and Groups (i.e. the project and activity) and that others were specifically entered for the current asset (i.e. the group). Certain default values can also come from the Category and others from the Group, for a same asset.
- General Ledger section:
- A general ledger account is required, as much for the Expense part as for the Accumulated Depreciation part.
- When transferring depreciation transactions, a Journal Entry transaction type will be generated, in order to charge the values to the GL accounts in question.
- The Calculated Value fields allow to see the default values, which come from the categories and groups.
- Project section:
- Click on the Save icon.
See also
- Project-to-Project Transfer
- Monthly Depreciation Calculation
- Yearly Depreciation Calculation
- Enter Production
Last modification: September 20, 2024