This article is part of the Fixed Assets Module training. Click here for more information on the Fixed Assets Module. Specifically, Depreciation Methods are set on the Asset Class, as well as on the Asset record.
- Each Depreciation record will be created with a status of 'Unposted' once the Asset has been 'Placed in Service'
- One Depreciation record will be created for each Period and each Book for the Effective Life of the Asset
- For example, if an Asset had 13 periods of Depreciation and was utilizing three Active Books, a total of 39 Depreciation records would be created (3 * 13)
- Each Depreciation record will Debit the 'Depreciation Expense' Account for the Asset and Credit the 'Accumulated Depreciation' Account
- These Accounts are set on the Asset Class or assigned on the 'General tab' of the Asset record.
- Straight Line - Asset Depreciation that results in the same equal amount of depreciation expense for each Period over the Effective Life of the Asset (with a possible amount variation in the final posting)
- Declining Balance - Asset Depreciation amount is calculated at the start of each year based on the Remaining Asset Value (not subtracting the Salvage Value) and multiplied by the selected Declining Balance Multiplier (125%, 150%, 175%, 200%, or 300%). Depreciation occurs until the Remaining Asset Value equals the Salvage Value.
- Declining Balance w/Straightline Switchover - Asset Depreciation follows the same method as Declining Balance but will switch to Straight Line when the calculated Straight Line Depreciation is greater than the Declining Balance Depreciation value for the year
- Sum of Years Digits - Asset Depreciation is accelerated based on the assumption that the productivity of the Asset decreases with the passage of time. Under this method, a fraction is computed by dividing the remaining useful life of the Asset on a particular date by the Sum of the Year’s Digits. This fraction is applied to the depreciable value of the Asset to compute the depreciation expense for the period
- None - No Depreciation records will be created, Asset will have no financial value
The following table contains sample Depreciation values for the same Asset using each Depreciation Method described above (if required, use the horizontal scrollbar at the bottom of the table to view all the table data).
The example Asset has the following characteristics:
- Asset Expected Useful Life: 5 Years, 0 Months
- Initial Value: $90,000
- Salvage Value: $2,000
- Declining Balance Multiplier (where applicable): 200%