How Assets and Depreciation works

Overview:

Fixed Assets depreciate its value over a period of time. In this manner, recording of its initial cost as well as its depreciation must be done to know the current book value of it. 

Scenario:

To identify set-up the Assets and Depreciation Accounts that will help to display the current book value of the fixed assets.

Procedure:

1. Under Navigation Panel, go to General Ledger > Chart of Accounts.

2. Under Property, Plant and Equipment Account, create a fixed asset account and accumulated depreciation account.

Accumulated Depreciation Accounts per each fixed asset accounts should be tagged as ADA in the Special Account. This should be set-up to identify what fixed asset will the accumulated depreciation be deducted.

3. To tag the Special Account, click the 3-dot button of the corresponding accumulated depreciation account. Select Edit.

4. Under Special Account, select Accumulated Depreciation Account.

5. Once done, click Save.

Application:

Set-up now the Assets and Depreciation to generate the current book value of the fixed assets.

1. Under Navigation Panel, go to General Ledger > Assets and Depreciation.

2. Click Add, to match the Fixed Assets with their corresponding Accumulated Depreciation Accounts.

3. Select the Fixed Asset Account on the dropdown, followed by its corresponding Accumulated Depreciation Account. Once done, click Submit.

4. Continue the same procedure until all fixed assets and depreciation accounts has been fully matched.

Having matched, accumulated depreciation will be deducted on the cost of the fixed assets once entries for depreciation has been entered. This will be generated under Statement of Financial Position.

5. Go to Report > General Ledger Reports > Statement of Financial Positions.

6. Click Preview.

Print Preview

Current book value of the fixed assets will be displayed on the report shown above.

Important Notice on Editing and Deletion:

• While the system allows you to modify account names or tags, editing recorded transactions or accounts is strictly prohibited once your Computerized Accounting System (CAS) is approved by the BIR. Modifications should be limited to maintain a proper audit trail.

• Deleting accounts or historical records is not allowed under BIR regulations once the system is live and approved. Maintenance of historical data is mandatory for audit purposes.