Posting depreciation to a general ledger (tutorial)

Assets should be recorded in your general ledger in an assets account and reconciled with the values in Fixed Assets by posting journal entries as necessary. This tutorial shows how to keep your ledger accounts reconciled with the figures discussed in the previous section.

 

 

Ledger accounts

 

Your general ledger should have the following accounts created:

All journal entries will be made to these accounts.

 

If you're only using the tax ledger then you'll only need a single set of asset accounts in your general ledger to hold the historic cost for all assets; otherwise, you'll need a separate set of asset accounts for tax and accounting, to hold cost and valuation figures.

 

Depending on your company's needs, journals can be posted either annually or monthly, and for either the entire company or for separate cost centres.

 

image\bm1.gif  Some companies may combine assets cost and accumulated depreciation accounts into a single book value account.

 

image\bm1.gif  All purchases (both for new assets and for additions to existing assets) should be posted to the general ledger as at the time of purchase.

 

 

End of year journals

 

If you only need to post journals at the end of the financial year the following journal entries will be required:

 

1. Add an entry to the depreciation expense account for the year to date Depreciation expense, and a contra entry for the same amount to the accumulated depreciation account.

 

2. Two entries will be required for disposal writebacks. The amount reported as Less cost w/back on the Disposals tab should be entered as a credit entry to the assets account. The amount reported as Plus depn w/back should be entered as a debit entry to the accumulated depreciation account.

 

3. Any loss or gain reported as Disposal gain/loss should be entered as a debit or credit as appropriate to the loss or gain on disposal of asset account.

 

When you perform your final reconciliation the closing book value in your general ledger should match the year closing cost figure in Fixed Assets. If there are any discrepancies, check that all additions and disposals have been correctly posted to the assets account.

 

 

Monthly reporting

Larger companies may need to post depreciation journals monthly. This would be most accurately done by using the Monthly Expense method:

Some companies use the following simple estimating method:

Take the current year closing Cost figure (on the Projections tab of the Group depreciation window) and divide by the number of periods and a use a repeating journal for that amount, posted to the depreciation expense account.

 

All other transactions are the same as those described above; any differences resulting from additions and disposals can be entered as adjustments either in the appropriate month or at the end of the financial year, depending on your usual practice.

 

 

Separate cost centres

 

If your company requires depreciation to be broken down by cost centre you'll need to enter journals for each cost centre separately. The entries will be as described above, but instead of creating totals for the entire company a total for each cost centre will be required. These can be generated by either calculating each centre separately on the Group depreciation window, or by printing the appropriate Tax schedule reports. Each cost centre will be treated in the same way as illustrated here for the entire company.

 

 

What next?

 

This tutorial has shown how to reconcile Fixed Assets with an external general ledger program, and completes the general ledger tutorial section. Along with the Asset transactions tutorials, the Administration tasks tutorials and the Previewing reports section these are a complete introduction to the most frequent Fixed Assets commands. All other tasks are fully covered in the on-line help, which can be referred to at any time by pressing F1 or by opening the Help menu.

 

 

See also

 New General Ledger Interface

Calculate group depreciation

Managing a general ledger tutorials