The Depreciation Class is used to determine the rate of
depreciation and the residual percentage.
Only one depreciation class can be assigned to each Fixed Asset
Tag.
Classes can be maintained in the Depreciation Classes window in
the "Inventory" parameters on the Accounting tab of the
Configure System Settings.
An operator must be assigned a Security
Role that allows permission to the Accounting - Depreciation
Classes in order to access this table.
When the Calculate Depreciation utility
is run, the depreciation per product is calculated according to the
rate.
After printing, if the depreciation report is accepted, the
depreciation program updates the Fixed Asset Tags. Generally the
depreciation amount is NOT posted automatically to the General
Ledger, so a General Ledger Journal entry is required to update the
depreciation in the General Ledger.
Note: The percentage of rental revenue depreciation method works
differently, and can post directly to the General Ledger in the
Daily Close.
Refer to Depreciation Methods for further
details.
If your firm does want the depreciation to post in summary to
the General Ledger, by division, this can be activated in the
Company Posting Parameters.
An extra column and window appear in the Depreciation Classes
screen so the correct default G/L accounts can be assigned for
these postings.
The postings are generated from Print
Depreciation Report.
EXAMPLE: Yearly Depreciation CLASS DESCRIPTION METHOD RATE% #DEPNS ----- ----------- ------ ------ ------ 8 Revenue Can. CCA Class 8 (over $200) D 20.00 1 10 Revenue Can. CCA Class 10 (over $200) D 30.00 1 12 Revenue Can. CCA Class 12 (under $200) D 100.00 1 EXAMPLE: Monthly Depreciation CLASS DESCRIPTION METHOD RATE% #DEPNS ----- ----------- ------ ------ ------ 8 Revenue Can. CCA Class 8 (over $200) D 20.00 12 10 Revenue Can. CCA Class 10 (over $200) D 30.00 12 12 Revenue Can. CCA Class 12 (under $200) D 100.00 12
CLASS DESCRIPTION METHOD RATE% #DEPNS RESIDUAL% ----- ----------- ------ ------ ------ --------- 1 5 years - yearly Depn - no residual S 20.00 1 2 5 years - monthly Depn - no residual S 20.00 12 3 5 years - monthly Depn - 10% residual S 20.00 12 10.00 4 4 years - monthly Depn - 10% residual S 25.00 12 10.00 5 2 years - monthly Depn - 10% residual S 50.00 12 10.00Note: Using the Straight Line method, the Depreciation Base To Exclude Residual flag in the Company Posting Parameters can be used to control whether the depreciation and the alternate depreciation calculations are based on the full cost of the equipment, or on the cost of the equipment less the residual.
Loading:
To setup the Depreciation Class table the fields include:
Note: Any Depreciation Class that is based on either of the "Percentage of Depreciation" methods (Codes % or #), cannot be used in the Alternative Depreciation on an Asset Tag.
Changing the Depreciation Method on a Depreciation
Class:
When an existing Depreciation Method is
changed on a Depreciation Class such as from Straight Line
to Declining Balance, a warning is triggered that the YTD values on
the relevant Tags will be reset to Zero so that the calculations
for the new Method are not skewed by the calculations from the old
Method.
If this reset is not accepted the Method cannot be changed.
If this is accepted, the 'YTD Number of Depreciations' and the 'YTD
Depreciation Dollars' for all Asset Tags
assigned this Depreciation Class are reset to ZERO when the
Method is changed on the Class, and a spreadsheet is generated
listing the products and tags affected.
This reset of values applies to both 'Standard' and 'Alternate'
depreciation calculations that have been assigned the
Depreciation Class on the Asset Tag
and will be impacted by the change in method.
Depreciation History on the tag is not changed.
A record is written to the Audit Log for
the category of 'CLASS DEPRECIATION METHOD' recording what was
changed.
Note: If the Method is being changed to MACRS a reminder is triggered to run the MACRS Accumulated Depreciation utility after applying change to the Method on the Class.
For the % methods - "Percentage of Revenue", this Rate is the percentage of the rental revenue per rental.
The Rate field does not apply to the "Flat Rate" method as the
depreciation amount per unit is entered on the Fixed Asset Tag of
the equipment.
The Rate field does not apply to the "MACRS" method either, as the
different yearly rates are setup in the MACRS
Depreciation Table in the "Inventory" parameters on the
Accounting tab of Configure System
Settings.
This does not apply to "Percent of Rental Revenue", or the "MACRS" methods.
Note: Two types of depreciation can be tracked for each Fixed Asset, standard (or book value) and alternate depreciation. Alternate depreciation can be used for tax or management purposes. The number of times depreciation is run per year for a product, should be the same for both types of depreciation. This is because once disposal of rental products is completed in Allocate Bulk Disposals, they are removed from the depreciation run, whether standard or alternate.
Leave this field blank if a residual does not apply.
To enter a residual of 10%, enter 10.0000.
The Residual percent does not apply to "MACRS" method.
Note: Using the 'Straight Line 'method with a residual percent, the Depreciation Base To Exclude Residual flag in the Company Posting Parameters controls whether the depreciation calculation is based on the full cost of the equipment, or on the cost of the equipment less the residual.
Sale of Asset Reversing Depreciation Postings:
Depreciation postings are also generated by the sale of Non-Bulk
Rental Equipment on an invoice.
The reversing accumulated depreciation transactions post and print
as part of the invoice on the AR Sales Journal or Rental
Journal Transactions report from Daily
Close 3.
Note: This automatic posting process does NOT apply to Alternate depreciation.
Depreciation Accounts window:
This window on the Depn Accts field is enabled when Post
Depreciation to G/L is activated in the Company Posting Parameters, and can be used to
define the G/L posting accounts for this Depreciation Class, as
follows:
This account is also debited to reverse the accumulated depreciation amount per the Asset Tag when a Non-Bulk rental product in this Depreciation Class is sold.
Note: The Depreciation Reversal Utility will fail if the GL accounts are invalid and the feature to Post Depreciation to G/L is activated in the Company Posting Parameters.
POSTING CHART EXAMPLE:
______________________
Purchase Rental Equipment for 1000.00
Depreciated it for a total of 200.00 so that Book Value is reduced to 800.00
Then sell the asset for 1500.00
Postings for Purchase:
Debit Inventory Asset Account: 1000.00 (Purchase Cost)
Credit Accounts Payable: 1000.00
Postings for Depreciation:
Debit Depreciation Expense: 200.00 (Depreciation total)
Credit Accumulated Depreciation: 200.00
Postings for Sale:
Debit Accounts Receivable: 1500.00 (Sale Price)
Credit Revenue Account: 1500.00
Debit COGS Prod Class Expense: 800.00 (Book Value)
Credit Inventory Asset Account: 800.00
Debit Accumulated Depreciation: 200.00 (Reverse Depreciation with remaining Inventory Cost)
Credit Inventory Asset Account: 200.00
| Converted from CHM to HTML with chm2web Pro 2.85 (unicode) |