Depreciate assets

Use this option to record the depreciation of your assets and make sure that your company's Profit and Loss and Balance Sheet accounts are updated with accurate depreciation values.

Only active assets with some Net Book Value are listed.

You can use the following methods of depreciation:

• Straight Line

  The asset's value is reduced by a percentage value that is based on the Initial Value, the Residual Value and the Asset Life span in years or periods until the Net Book Value is reduced to the Residual Value (which may or may not be zero). The value of depreciation remains the same each time.

  This is appropriate if you forecast that use of the asset is spread evenly across the time period, for example, the use of a temporary prefabricated building.

  What is the calculation

  Annual Straight Line	Initial Value - Residual Value / Asset Life in years
  Period Straight Line	Initial Value - Residual Value / Asset Life in periods

  Note: If the calculation pushes the Net Book Value to a value that is less than the Residual Value, the depreciation amount posted is the Net Book Value - Residual Value.

  See an example

  If you enter an asset with an Initial Value of £12000, a Residual Value of £3000, and you want this to be depreciated over a three year period:

  Year	Depreciation Calculation						Depreciation Amount	Net Book Value
  	Initial Value		Residual Value		Asset Life in years
  1	12000	-	3000	/	3		£3000	£9000
  2	12000	-	3000	/	3		£3000	£6000
  3	12000	-	3000	/	3		£3000	£3000

  If this was by period, the initial value would be divided by the number of periods in the three years, for example 36 if you were using 12 periods per year, in order to give a periodic depreciation amount. In this example that would be £250. Each period that passed the net book value would reduce by that amount

  Note: Straight Line depreciation is applicable if the value of the asset is to be reduced evenly over time (e.g. furniture).

• Reducing Balance

  The asset's value is reduced by a percentage of the Net Book Value (which reflects the asset's current worth) every year or period until it is reduced to a realistic scrap or write off value (which may or may not be zero). The value of the depreciation reduces every time. This is appropriate if you expect the asset to wear out quickly.

  Note: Reducing Balance depreciation is applicable if the value of the asset needs to be reduced quickly at first and more slowly later (e.g. vehicles).

  What is the calculation

  Annual Reducing Balance	Net Book Value * Annual Depreciation %
  Period Reducing Balance	Net Book Value * Period Depreciation %

  Note: If the calculation pushes the Net Book Value to a value that is less than 0 (zero), the depreciation amount posted is the difference between the Net Book Value and 0 (zero).

  See an example

  If you enter an asset with an Initial Value of £12000, the initial Net Book Price is £12000 and you want to depreciate this over four years, this would be a depreciation of 25% each year.

  Year	Depreciation Calculation					Depreciation Amount	Net Book Value
  	Net Book Value		Depreciation Percent
  1	12000.00	*	25	/	100	£3000.00	£9000.00
  2	9000.00	*	25	/	100	£2250.00	£6750.00
  3	6750.00	*	25	/	100	£1687.50	£5062.50
  4	5062.50	*	25	/	100	£1265.63	£3796.87

  Note: Depreciation of an asset using the Reducing Balance method is higher initially than the Straight Line method and it then reduces over the asset life. Theoretically, using the Reducing Balance method, the book value will never reach zero but for all practical purposes, the write off value of an asset is reached by using a realistic percentage.

• The depreciation amount is calculated from the Depreciation Method.
• The depreciation value is subtracted from the asset's Net Book Value.

• The asset's Last Depreciated date is updated.

  Note: This posts for the current year or period in the current year, not for previous years, regardless of the Date acquired.

• Nominal postings are made as follows:

  • Annual depreciation methods: A single nominal posting is made for annual depreciation at the end of the financial year.
  • Period depreciation methods: A posting per period depreciated.

  • The depreciation amount is credited to the asset's Balance sheet account.

    Note: If you dispose of an asset before the posting is credited to the Balance sheet account, the Net Book Value reflects the amount remaining to be credited to that account. Thus the disposal will only post the remaining amount and not 'double post' any value.

  • The depreciation amount is debited to the asset's Profit and loss account.
• A fixed asset transaction posting is also made. This contains the following information:

Reference	The asset code.
Narrative	The description, Depreciation of asset.
Transaction Date	The date you specify.
Transaction Type	This is type Depreciation.
Accounting Period	The accounting period in which posting (and depreciation) will be made.
Old Net Book Value	The old net book value.
New Net Book Value	The new net book value.
User name	The user name.
User number	The user number.
URN	The transaction unique number.
Posting Value	The net book value posted.