Depreciating Assets

Depreciation is an accounting method for allocating the cost of a tangible asset over its useful life for both tax and accounting purposes. For tax purposes, businesses can deduct the cost of the tangible assets they purchase as business expenses. In the United States, businesses must depreciate these assets in accordance with IRS rules regarding how the deduction may be taken.

Configuration

The following items are required in order to depreciate assets in DEACOM.

Work Centers and Containers- Work Centers and Containers representing the fixed asset will need to be created.
Permission set to Yes for the security settings "Production - edit work center fixed assets" and "Inventory - edit container fixed assets". If users do not have these permissions, they will be allowed to view Work Center and Container records, but they will not be allowed to access or modify the Fixed Assets tab of those records.
Accounts - two accounts will need to be created within the Chart Of Accounts for assets to be properly valued. For setup instructions, refer to Configuring the Chart of Accounts.
- Depreciation Expense account - a depreciation expense account will record the expense from using the asset on the income statement. The depreciation expense account is specified and in the "Depreciation Expense" field in Accounting Options.
- Accumulated Depreciation account - an accumulated depreciation account will decrease the value of an asset on the balance sheet (this is why it is a contra-account). The accumulated depreciation account is specified in the "Account" field on the Work Center and Container Fixed Assets tab.

Process

Posting depreciation means to account for depreciation using the proper journal entries. Companies must depreciate their assets annually. Depreciating assets will match the cost to purchase the asset and only record the expense as the company uses the asset. The two main accounts involved are "Accumulated Depreciation," which is a contra-account to the asset and "Depreciation Expense."

The Accumulated Deprecation account will decrease the value of an asset on the balance sheet, which is why it is a contra-account. The Depreciation Expense account will record the expense from using the asset on the income statement.

Selecting a depreciation method

For each Work Center or Container, users will need to select an option in the "Depreciation" field on the Fixed Assets tab. Almost all assets are depreciated using the straight-line method over the expected useful life of the individual assets. An asset’s life is the period of time over which services are expected to be rendered by the asset. The calculation of depreciation is based on historical cost (capitalized costs) and calculating accumulated depreciation is a simple matter of running the depreciation calculation for a fixed asset from its acquisition date to its disposition date. Typical Fixed Assets Journal Entries can be found on the Sample Accounting Postings page.

Posting depreciation

Depreciation may only be posted for Work Centers or Containers when the "Depreciation" field is not set to "None" and requires an account specified in both the "Depreciation Expense" field in Accounting Options and the "Account" field on the Work Center or Container Fixed Assets tab.

Note: Beginning in version 16.00.125 clicking the "Post Depreciation G/L" button will display the Depreciation Date form allowing uses to set the specific date depreciation will be posted. This supports the ability to backdate postings.

To depreciate a single Work Center or Container at a time:

Navigate to Production > Maintenance > Work Centers or Inventory > Maintenance > Containers.
Select the desired Work Center or Container and click "Modify".
Click “Post Depreciation G/L” (users may have to first navigate to the Fixed Assets tab of the form) at the top of the form.
The system will post the depreciation costs. Specifically, the system will take the value in "Current Cost" and subtract it from the "Last Posted Cost" (or the "Acquisition Cost" field if depreciation has never been posted for this Work Center or Container).

To depreciate multiple Work Centers at once:

Navigate to Production > Maintenance > Work Centers.
Filter the grid to the set of Work Centers to be depreciated.
Click “Post Depreciation G/L” at the top of the form.
A system prompt will appear asking the user to confirm the action. Click "Yes" to continue.
The system will post the depreciation costs for all visible Work Centers. Specifically, for each Work Center, the system will take the value in "Current Cost" and subtract it from the "Last Posted Cost" (or the "Acquisition Cost" field if depreciation has never been posted for this Work Center).

Depreciation Example & How Depreciation Is Calculated

Deacom calculates a daily depreciation rate. The system then takes the daily depreciation rate and multiply it by the number of days to depreciate. The calculations are as follows:

Daily Amount: Acquisition cost(Acquired date – end depreciation date)
Days to depreciate: (last posted date – posting date)
Depreciation Amount: daily amount * days to depreciate

See the example below.

Name	Description	Acquisition Cost	Acquired Date	Last Posted Date	Months	End Depreciation	Days	Daily Amount $	Posting Date 1/31/2024	Depreciation $
Blender	Blender 1	10,000,000.00	1/1/2024	12/31/2023	361	2/1/2054	10989	910.00	30	27,300.03