Problem: How to make a reserve for depreciation and then sell the item?

Solution: Make a reserve for depreciation through the Other expenses document, enter the Invoice, write off the reserve for depreciation and settle the expense amount.

1. Create a depreciation reserve for the item using Other expenses document with Transaction Type: Accrual


On the Expenses tab, select an expense GL account in the debit, the 2010600 Allowance for Obsolescence account in the credit column, and enter the amount of depreciation reserve



2. Enter the Invoice document.

Note!!

• The income account will have a lower amount than the book value of the item, as the item is being sold below cost. However, the item itself is written off at its full book value

• The expense accounts in the Other expense document and in the Invoice differ. In invoices, the COS: Goods for Resale account is used automatically to record the cost of goods sold (direct costs linked to sales, not for manual or indirect expenses) when items are sold. In the Other Expenses document, this account is not available because the Other Expenses document is used for overheads, not inventory-related costs.

3. The cost of the item in our example is 4000,00 AED but the amount of expenses written off for this item is 5000,00 AED (Other Operating expenses + COS: Goods for Resale)

Dr Other Operating expenses - Cr Allowance for Obsolescence - 1000,00 AED - the depreciation reserve creation

Dr COS: Goods for Resale       - Cr Goods                                      - 4000,00 AED - the inventory write-off

Hence, it is necessary to reduce the amount of the expense account from the invoice as the partial expense write-off for this item has already been made at the moment of depreciation reserve creation.

It is also necessary to remove the reserve for depreciation on the Allowance for Obsolescence account.

The necessary transaction can be done manually

But the manual transaction does not make a record to the Accumulation Register "Income and Expenses", which the program uses to close the month. Thus, it is also necessary to make an additional adjustment to the register in order to ensure the correct month-end closing.

4. Adjust the Accumulation Register "Income and Expenses"

• Go to Administration>Administration Document>Register Correction 
• Create a new document

5. Click on Registers Content Setting.

6. On the Accumulation Registers tab, select Income and Expenses. Click OK

The entry in the Accumulation Register "Income and Expenses" should be the exact opposite of the entry in the register when the invoice is posted, as in the manual posting, we reduced the amount of the expense account from the invoice

The Invoice had the following entry:

Repeat all the analytics, but put the amount with a minus sign (in this example, -1000.00 AED), as the expense was reversed by a manual operation.

Only after the register adjustment, the month will be closed correctly, and the expense will be written off properly.

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