Fixed asset depreciation

Important

Depreciation is a periodic transaction that typically reduces the value of the fixed asset on the balance sheet, and is charged as an expenditure to a profit and loss account. Therefore, a main account is typically used to credit the periodic depreciation on the balance sheet. An offset account is an account in the profit and loss part of the chart of accounts.

As of version 10.0.24, the Calculate positive depreciation asset book configuration option on the Books page enables depreciation to debit a fixed asset that is acquired with negative book value (credit).

Usually, only a correction to a posted depreciation transaction is posted as a depreciation adjustment. Therefore, both the main account and the offset account are set up just like the accounts for depreciation. A depreciation adjustment can be either a positive amount or a negative amount, but the functionality of the main account (as a balance sheet account) and the functionality of the offset account (usually as a profit and loss account) remain the same.

Extraordinary depreciation

Extraordinary depreciation works like basic depreciation. Therefore, a main account is used to credit the depreciation amount to the balance sheet and reduce the value of the fixed asset. An offset account is a profit and loss account, where the depreciation that is calculated for the fiscal period is charged as an expenditure.

Extraordinary depreciation works independently of basic depreciation. By having extraordinary depreciation as a separate transaction type, you can post and report the extraordinary depreciation separately from the basic depreciation.

Special depreciation allowance

You can use special depreciation allowances to take extra depreciation amounts during the first year that an asset is put in service and depreciated. Special depreciation allowances must be taken before any other depreciation calculations. Because special depreciation allowances are often unknown until later in the service life of the fixed asset, it's best to use this type of depreciation with a book that doesn't post to the general ledger. You can use the Delete transactions not posted to general ledger periodic function to delete the transaction history for these books. You can then delete the depreciation history for the fixed asset book, post the special depreciation allowance when it's known, and then post the remaining depreciation transactions for the year.

You can create an unlimited number of special depreciation allowance records. After you assign those records to an asset group book, they are applied to the asset book.

A special depreciation allowance is entered as either a percentage or a fixed amount. When you post depreciation proposals, special depreciation allowance transactions are posted to the book as transactions that are separate from the depreciation transactions.

Depreciation calendars

Each book has a calendar that is used when you depreciate fixed assets. By default, if you don't indicate a calendar on the book, the book uses the ledger fiscal calendar. You must select a fiscal calendar for a book when the depreciation profile that is associated with the book uses a fiscal depreciation year.

You can create shared calendars by using the Fiscal calendars page in General ledger.