Depreciate a Fixed Asset

Overview

Fixed asset depreciation provides a way to determine the value usage of an asset over a given period of time. With Accounting Seed, you can calculate this expense by spreading the asset purchase value over Accounting Periods based upon usage. Depreciating fixed assets helps you to understand the loss of value, which might affect your earnings and tax obligations.

In Accounting Seed, one of three Depreciation methods can be selected from the Depreciate Fixed Asset wizard, which displays when you click Depreciate Asset from a Fixed Asset record. These include the following:

Straight Line - Prorated Monthly - this is the default Depreciation method, which is a hybrid of the Full Month and Daily Depreciations. The first and last months will be prorated based upon the remaining days in the first month and the value of the fixed asset (or the value in the Amount field) still remaining during the last month. The depreciation amount for each month between the first and last months will be the same (straight line). The Accounting Periods must already be set up and open for the number of selected periods. When this method is selected, the number of Accounting Periods and a Start Date are required fields.
Straight Line - Full Month - the fixed asset value (or the value in the Amount field) will be divided equally among the number of selected Accounting Periods for depreciating the asset. The Accounting Periods must already be set up and are open for the number of selected periods. When this method is selected, the number of Accounting Periods and a Start Date are required fields.
Straight Line - Daily - the depreciation amount for each period is based upon the number of days in each month. When “Daily” is the selected Depreciation method, both a Start Date and an End Date are required fields.

Depreciate for more than 60 Accounting Periods

Note: While the below mentions amortization, the same information can be used to depreciate a fixed asset for more than 60 periods.

In the UI (User Interface) the selected period of time can be up to 60 Accounting Periods. If you need to amortize for a longer period of time, the Amortization API supports up to 360 Accounting Periods. This can be executed using Apex code or from a flow, which provides invoking flexibility.

When you execute the Amortization method, the returned result is an AmortizationResult object, which will contain a list of Amortization entries objects (if successful). However, the Amortization method does not commit these record to the database. This allows for data inspection before committing it to the database, and if necessary, manipulation before committing. For example, you might have added a custom field to the SObject, and you want to populate it prior to committing to the database. Or, you might want to run multiple scenarios to present to a user before committing. It also allows for better performance when invoked from a flow. The caller is responsible to commit the records to the database based upon their choice of action.

For more information, refer to our Amortization API documentation: Amortize Method, Amortization Options, and the Amortization Result.

Depreciate Fixed Asset wizard

The Depreciate Fixed Asset wizard includes hyperlinks to the Fixed Asset record and the Ledger record, as well as a Help link to this Knowledge Base article.

Fixed

The wizard includes the ability to preview calculations of the depreciation periods and amounts. Below is an example of the preview calculations for each Depreciation method. Each of the three sample screens below are based upon the total fixed asset amount of $56,000.00.

Straight Line - Prorated Monthly

With this Depreciation method, notice that the first month is prorated based upon the remaining days in that first month. Using this example, for the next five months, the amount is exactly the same. And the final (last) month is prorated based upon the remaining amount.

Fixed

Straight Line - Full Month

With this Depreciation method, the amounts will be equally divided among the number of periods.

Note: In some instances, the final period may be slightly different depending upon the initial total amount.

Fixed

Straight Line - Daily

With this Depreciation method, the amount for each period is based upon the number of days in each month. Using this example, the Start Date is July 3, and the End Date will be December 31. Therefore, each period is based upon the number of days for each month between the Start Date and End Date.

Fixed

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Navigate to Accounting Home and click the Create Entries tab. Then, under the Ledger menu, click Fixed Assets.
Select a list view (other than the Recently Viewed list view).
Select the Fixed Asset record for which you want to depreciate.
Click Depreciate Asset. The Depreciate Fixed Asset wizard displays.
Select one of the following Depreciation methods:
1. Straight Line - Prorated Monthly
2. Straight Line - Full Month
3. Straight Line - Daily
Click Next to add the Term Information.
1. Straight Line - Prorated Monthly or Straight Line - Full Month: The Amount will automatically populate from the Fixed Asset record. This can be modified, if necessary. Additionally, the Number of Periods and the Start Date are required fields, and will need to be added.
2. Straight Line - Daily: The Amount will automatically populate from the Fixed Asset record. This can be modified, if necessary. Additionally, the Start Date and the End Date are required fields, and will need to be added.
(Optional) Enter a Description.
To review the calculations, click Preview Calculations.
Note: In the example, Prorated Monthly was the selected method. Therefore, the Preview Calculations are based upon prorated monthly amounts for the selected number of Accounting Periods.
From the Preview Calculations, click Back to return to the Term Information.
Click Next to access Accounting Information & Create.
Click the Search icon to search for and select the appropriate GL Accounts for the Debit and Credit entries, which are required fields.
(Optional) Enter any or all of the remaining fields, such as Project and Project Task.
Click Create Entries to create the Amortization Entries for the depreciation records.
To view the entries, from the Fixed Asset record, click the Depreciation tab.

Note: Once the Amortization Entries (depreciation records) have been created, the entries will post based upon the Post Settings.

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The naming convention for each Amortization Entry Name is the Fixed Asset record name and the Accounting Period. For example, in the sample screen above the Amortization Entry Name for the first entry is Office Equipment, followed by the first Accounting Period (2023-07).

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