Depreciation figures (tutorial)
Fixed Assets manages all depreciation calculations automatically, taking into account asset value, depreciation rates and methods, additions, disposals and revaluations. Before looking at how to reconcile the results of these calculations with your general ledger it is worth looking at these figures in more detail. This tutorial examines the depreciation totals on the Calculate group depreciation window.


Opening the depreciation totals window

Depreciation totals can be calculated for your company using the Calculate group depreciation window. Open this window by using the Calculate group depreciation command on the Assets menu. The Depreciation tab will be selected by default.

To view the end-of-year figures select period 12 from the period buttons and click the Calculate button to calculate and display the total depreciation summary for the company. These are the figures used for general ledger posting, and should be understood before they can be related to the general ledger.

image\bm1.gif  These totals can also be generated by printing the appropriate Tax schedule report.


Tax ledger

Most small companies will only need the tax figures. These show depreciation calculated at the tax depreciation rate for each asset, and use each asset's historic cost rather than its valuation.

 If the difference between historic cost and accounting valuation isn't important for your assets and all of your assets are depreciated at IRD/ATO rates for accounting purposes then you probably won't need to use the accounting ledger. If you do, refer to the Accounting ledger notes next in this section. All accounting figures are calculated in the same way as the tax figures, using the depreciation methods and rates set up for each asset.

The Year opening values of the Depreciation tab show:

· The total historic cost of all assets as at the beginning of the financial year.
· Accumulated depreciation as at the beginning of the year.
· The opening book value of all assets.

These should be the same as the previous financial year's closing figures for the relevant accounts in your general ledger.

The Year to date values show the totals for the current financial year at the end of the selected period; as you've calculated for period 12 these will be for the year itself. These figures show:

· All additions to the historic cost of assets during the year.
· All net write backs from disposals during the year.
· The total depreciation expense for the year.

image\bm1.gif  Full write backs details can be viewed on the Disposals tab. The Net write backs figure shown here can be verified as the Cost write back less the Depreciation write back.

The Period closing values show the new totals for the company at the end of the period. These are end-of-year figures in this case since you've calculated for period 12, and will be the same as the Current year closing values on the Projections tab:

· Closing historic cost.
· Total accumulated depreciation.
· Closing book value.

image\bm1.gif  The calculations for these figures are described in Calculate group depreciation.

As you've calculated for period 12, the closing book value is the closing tax ledger book value for the year.

image\bm1.gif  The year to date figures for the last period are also displayed as the Current year closing values fields on the Projections tab.


Accounting ledger

The accounting ledger allows you to keep asset values separate from their taxable value. This will be the case if you need to record accounting valuations for assets as well as their taxable cost, or if you need to depreciate assets for accounting purposes at rates different to the IRD/ATO rates.

 If you're using both ledgers, you'll need to have two parallel sets of accounts in your general ledger program: one set for tax values, and another for accounting values.

The differences between the two ledgers are:

· The tax ledger shows historic costs, while the accounting ledger shows asset values.
· Revaluation additions only affect the accounting ledger (as revaluations apply to accounting value but not to historic costs).
· Each asset can have separate depreciation rates and methods for the two ledgers.
· Write backs for disposals are calculated for each ledger from asset tax and accounting depreciation rates and methods. These will differ where assets have different depreciation amounts.

The Year opening values of the Depreciation tab are similar to those for the tax ledger:

· The total accounting value of all assets as at the beginning of the financial year.
· Accumulated depreciation as at the beginning of the year.
· The opening book value of all assets.

These should be the same as the previous financial year's closing figures for the relevant accounts in your general ledger.

The Year to date values are the only ones treated differently to those for the tax ledger:

· The Additions value includes valuations.
· The Write backs on disposals value will differ if any assets disposed of are depreciated with different rates or methods for the two ledgers. The figure given is a net value; the Disposals tab shows the full details of all write backs.
· The Depreciation expense will differ where assets have different opening book values, depreciation rates or depreciation methods.

The Period closing values are treated similarly for both ledgers:

· Closing accounting value.
· Total accumulated depreciation.
· Closing book value.

image\bm1.gif  The year to date figures for the last period are also displayed as the Current year closing values fields on the Projections tab.


What next?

This tutorial has explained the depreciation figures you'll need for your general ledger. The next section, Posting depreciation to a general ledger, shows how these should be posted to an external general ledger program.


See also
Calculate group depreciation
General ledger tutorials
General Ledger Posting