The fixed Asset Depreciation documents are generated according to the depreciation method assigned to fixed assets.
You can get an overview of the depreciation of fixed assets by clicking on the link: https://userguide.firstbit.ae/x/3wouDQ
To calculate depreciation for fixed assets, first, enable the Depreciation of Fixed Assets option in your ERP system.
Depreciation Calculation Methods
Depreciation can be calculated either automatically or manually:
Automatic Calculation:
- Go to Accounting > Service Tools > Month-End Closing, select Calculate Depreciation, and click Execute. The system will automatically include depreciation in the month-end processing.
Manual Calculation:
- Navigate to Asset Management > Fixed Asset Documents > Fixed Asset Depreciations and create a new document. Click Calculate to list all active fixed assets. Use the Manual Processing button to adjust depreciation amounts or add specific assets manually. Assets marked for manual processing will not be included in the automatic calculation.
Depreciation for an asset ceases when its net book value equals its Salvage Value or zero if no Salvage Value is set. You can review net book values through the Depreciation Statement report.
Accounting Parameters for Depreciation
To enable depreciation calculation, specify these parameters for each asset:
- Gross Cost: Includes the initial cost plus any additional expenses.
- Salvage Value: The asset's residual value after use.
- Depreciation Method: Choose from Straight Line or Units of Production.
- Straight Line: Enter the Useful Life in months. Depreciation is calculated as (Gross Cost - Salvage Value) / Useful Life.
- Units of Production: Enter Estimated Production Volume. Depreciation is based on usage.
Initial parameters are set in the Fixed Asset Entry document. For re-assessment or capital improvements, use the Changes of Fixed Asset Parameters or Capital Improvements to Fixed Assets documents to update values and recalculate depreciation.
Depreciation Methods
Straight-Line Depreciation:
- Calculation: Monthly expense = (Gross Cost - Salvage Value) / Useful Life.
- Accumulated Depreciation: Total of prior months’ depreciation.
- Net Book Value: Gross Cost - Accumulated Depreciation.
Units of Production Depreciation:
- Calculation: Monthly expense = Month's Usage * (Depreciable Cost / Estimated Production Volume).
- Accumulated Depreciation: Sum of depreciation from all months.
- Net Book Value: Gross Cost - Accumulated Depreciation.
For detailed usage and depreciation reports, use the Statement of Depreciation and Fixed Assets Output reports, respectively.