Depreciation
Depreciation is the systematic reduction of a fixed asset's recorded cost over its useful life. Buildings, furniture and office equipment all depreciate; land does not. Running it keeps the balance sheet honest and produces the gain or loss figure you need when an asset is eventually sold or scrapped.
Where to find it
Go to Fixed Assets > New > Depreciation, or use Process Depreciation on the Overview.
Depreciation Details
The screen shows the parameters it will calculate from, taken from the asset record.
| Field | Description |
|---|---|
| Asset Name | The asset being depreciated. |
| Depreciation Method | Straight line, declining balance, sum of the year digits or one time. |
| Depreciation Rate | The annual percentage or life in years. |
| Depreciation Multiplier | The acceleration factor, where declining balance is used. |
| Depreciation Started | When calculation began for this asset. |
| Depreciation Last Processed Date | The most recent run. The next run picks up from here. |
| Depreciation End Date | When the asset is fully written down. |
| Quantity | Units on the asset record. |
| Purchase Cost Per Qty | Original cost of one unit. |
| Current Value Per Qty | Book value of one unit before this run. |
Setting the run
| Field | Description |
|---|---|
| Period / Months | How much time this run covers — a month, several months, or a year. |
| Starting from | The date the run begins, normally the last processed date. |
| Range | The span being depreciated. |
| Reference line | The reference the journal will carry. |
| Memo | A note explaining the run. |
| Refresh | Recalculates the figures after changing the period. |
What it posts
| Account | Effect |
|---|---|
| Depreciation Cost Account | Debited — the expense hits the profit and loss. |
| Depreciation / Disposal Account | Credited — accumulated depreciation grows and net book value falls. |
Both accounts come from the asset's category.
Run depreciation on a fixed schedule, monthly or at each period end. Catching up six months in one run gives the right closing balance but a profit and loss that shows nothing for five months and a spike in the sixth.
What cannot be depreciated
Land is not depreciated — it is not consumed by use. Register it as a fixed asset so it appears on the balance sheet, but leave it out of the depreciation run.
Action buttons
| Button | What it does |
|---|---|
| Process Depreciation | Posts the journals and moves the last processed date forward. |
| Refresh | Recalculates without posting. |
Related pages
- Depreciation View — the history for one asset
- New Fixed Asset — where method and rate are set
- Classes — the default rate
- Overview — accumulated depreciation and net book value