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Create and post depreciation for a fixed asset group by using depreciation books

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You can calculate depreciation for a group of fixed assets. The calculation is based on the number of days that is defined in the Asset group depreciation threshold field on the Fixed assets parameters page. The following table shows the various formulas that are used to calculate depreciation for asset groups.

Type of proposal Number of days that the asset is used Formula
Depreciation Equal to or more than the number of days in the Asset group depreciation threshold field (Net book value of the fixed asset group on the date of depreciation) × (Rate of depreciation that is defined for the depreciation profile)
Depreciation Less than the number of days in the Asset group depreciation threshold field (Net book value of the fixed asset) × (Depreciation threshold percentage that is defined in the parameters) × (Rate of depreciation that is defined for the depreciation profile)
Bonus depreciation Equal to or more than the number of days in the Asset group depreciation threshold field (Cost of acquisition) × (Rate of depreciation that is defined in the depreciation profile)
Bonus depreciation Less than the number of days in the Asset group depreciation threshold field (Cost of acquisition) × (Depreciation threshold percentage that is defined on the General ledger parameters page) × (Rate of depreciation that is defined in the depreciation profile)

Example

On April 1, 2008, you own three fixed assets: Machinery A, Machinery B, and Machinery C. The written-down value of Machinery A is INR 70,000, the written-down value of Machinery B is INR 1,64,000, and the written-down value of Machinery C is INR 84,000. The rate of depreciation is 15 percent. On November 2, 2008, you purchase Machinery D for INR 60,000. Then, on March 15, 2009, you sell Machinery B for INR 1,80,000 and Machinery C for INR 40,000.

The calculated written-down value of the asset group on March 31, 2009, is INR 1,58,000 (INR 3,18,000 + INR 60,000 – INR 2,20,000). This value is calculated by adding the amount of the new machinery to the sum of the written-down value of Machinery A, Machinery B, and Machinery C, and then deducting the proceeds from the sale of Machinery B and Machinery C.

You must calculate depreciation on the asset that is used for fewer than 180 days at a rate of 7.5 percent. In this case, the depreciation is INR 4,500 (INR 60,000 × 7.5%). The depreciation on the remaining amount of the written-down value of the asset group is calculated at a rate of 15 percent. In this case, the depreciation is INR 14,700.

On March 31, 2009, you must deduct the amount of depreciation from the written-down value of the group of assets (INR 1,58,000 – INR 60,000 = INR 98,000) to calculate the written-down value of the asset group on April 1, 2008. In this case, the written-down value is INR 1,38,800 (INR 1,58,000 – INR 19,200).

Depreciation isn't calculated for an asset group that has a written-down value of 0 (zero). If the sale amount of all or some assets in a fixed asset group exceeds the net book value of the group during a year, this situation is considered a short-term capital gain. Therefore, the asset group will have a written-down value of 0 (zero). If the sale amount of all assets in a fixed asset group is less than the net book value of the fixed asset group, this situation is considered a short-term capital loss. Therefore, the asset group will have a written-down value of 0 (zero).

If a positive or negative amount is entered in the Debit field on a journal line, the same amount is updated on the Fixed asset balances page. However, if a positive amount is entered in the Credit field, the amount is updated as a negative amount. This negative amount is then updated as a positive amount on the Fixed asset balances page.

Create and post fixed asset depreciation in journal

  1. Create a new Fixed asset journal to post depreciation transaction.

  2. In the Name field, select journal for posting depreciation.

  3. Select Lines and add new line.

  4. In the Transaction type field, select Depreciation transaction type.

  5. In the Account field, select a fixed asset.

    Note

    The Fixed asset number field isn't available in a journal line if the Asset group depreciation is set to Yes in fixed asset book.

  6. In the Fixed asset group field, select a fixed asset group.

  7. Enter depreciation amount in the Credit field.

  8. Select Post to post the journal.

  9. Click Fixed assets > Fixed assets > Select a fixed asset > Books tab on Action Pane.

  10. Click Transactions and notice that the depreciation amount was posted for the fixed asset group without the specification of an asset.

  11. Close the Fixed assets transactions page.

  12. Click Inquiry > Asset group balances and notice that the total depreciation amount was posted for the asset group in the selected book.

    Note

    In the journal you can use the Proposal function for various proposal types to create transactions for fixed asset groups. Asset group depreciation doesn't apply to proposals of the Consumption depreciation, Revenue recognition of reserves, or Extraordinary depreciation type.