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FirstBIT ERP provides the functionality that allows you to accept the assets to accounting, perform depreciation (decrease in cost), and then dispose of the assets.
To start depreciation calculation, you must create a fixed asset, match it to an inventory item (produced or purchased) and accept the item to accounting as a fixed asset.

Accepting to Accounting

To add a new fixed asset to accounting, go to: Accounting > Fixed Assets> Fixed Asset Entries.

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• Initial Cost
• Whether the asset will be depreciated
• Which depreciation method will be used: Linear or Straight Line or Units of Production.
• GL Accounts
• Business activity
• Expense Item

At any time, you can view the list of fixed assets and the accounting parameters by using the Fixed Assets master data.

Changing the Accounting Parameters for Fixed Assets

A fixed asset appears in the financial records at its net book value, which is its original cost, minus accumulated depreciation. The net book value of an asset is always declining.

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Using the Depreciate check box, you can stop depreciation for some period of fixed asset conservation. The asset will appear on the balance sheet, however, the depreciation will not be calculated, and the net book value will not be changed during this period.

Using

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the Straight Line Depreciation method

The key difference between amortization and depreciation is that amortization charges off the cost of an intangible asset, while depreciation does so for a tangible asset.

Another difference between the two concepts is that amortization is almost always conducted on a straight-line basis, so that the same amount of amortization is charged to as expense in every reporting period.

To use the Linear the Straight Line depreciation method, you must specify the initial cost of the fixed asset and enter the number of months of useful life (how many months it must be depreciated).

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Then, during each month-end closing process, the depreciation expense which is equal to Initial Cost/ Useful Life (Months) will be posted. The depreciation calculation is not performed once the net book value becomes equal to 0.

Using the Units of Production Depreciation method

According to the Units of Production depreciation method, depreciation expenses are calculated proportionally to usage of the fixed asset which has a limited resource. Generally, this method is used when usage differs significantly from month to month.

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The depreciation expense and accumulated depreciation amounts will be calculated during the Month-End Closing process. The depreciation calculation is not performed once the net book value becomes equal to 0.

Selling the Fixed Assets

After some period of fixed asset usage, the organization may decide to sell the asset. The sales may require the recording of a gain or loss on the transaction in the reporting period when the sales occurs.

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Writing off the Fixed Assets

A fixed asset is written off when it is determined that there is no further use for the fully depreciated asset, or if the asset is disposed of without receiving any payment in return or damaged before it was fully depreciated. A writeoff involves removing the fixed asset from the balance sheet, that is, from GL accounts.

Writeoffs Write offs of fixed assets are registered by creating the following documents: Accounting > Fixed Assets > Fixed Asset Write Offs. For details, see Fixed Asset Write Offs.

A fixed asset writeoff write off involves reversing of both the recorded cost of the fixed asset and the corresponding amount of accumulated depreciation. Any remaining difference between the two is recognized as either a gain or a loss. Proper fixed asset writeoffs write offs ensure that the balance sheet correctly reflects the assets actually owned by the entity.

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If the asset is fully depreciated, writeoff write off debits all accumulated depreciation and credits the fixed asset GL Accounts.

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The organization purchased a woodworking machine with useful life of 4 years for $2000 on June 1, 2015. The machine was depreciated by using the linear depreciation method during 3 years and 6 months. Then, the machine was damaged beyond repair. The organization wrote off the machine. At the moment of writeoffwrite off, the net book value of the machine was 1750.

The writeoff write off document generates the following journal entries:

Viewing the Fixed Assets Documents

To find all the documents related to a particular fixed asset, go to: Accounting > Fixed Assets > Fixed Asset Documents. Using this form, you can filter all the fixed asset documents by document type, particular fixed asset or both. Also, you can search the document by inventory number or a string in the fixed asset description.  For more information, see Fixed Asset Documents.

Reporting Fixed Assets on Financial Statements

Your organization must show both tangible and intangible assets on your balance sheet, with tangible assets listed first. For details, refer to Financial Statements.

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