How to handle an over depreciated asset

SUGGESTED

I see many writes ups explaining how to handle an under depreciated asset but how do you handle an over-depreciated asset?. So say an asset initially is set (incorrectly) to a life of 1 year, and depreciation is run for the first 6 months.  Then the life is changed to 10 years. The asset has been overly depreciated up until this point.  Is there an option in Sage that would adjust AD in the next month. This would cause the current month depreciation expense to be negative, but would adjust AD to where it should be.  Or is there another work around for this situation?

Thank you.

Parents
  • 0

    If AD refers to Accumulated Depreciation and the asset uses a Straight-line method, such as SF or SL, which has been posted to the General Ledger, there are two work-around options. However, both require a manual adjustment to your general ledger to remove the over-depreciated amount.

    Using your example and a $10,000 asset PIS in January with a 1-year life that has been depreciated for 6 months, to the end of June, the AD is $5,000 at the end of June. It should be $500.

    1) Change to life to 10 years and reset to the Beginning Date. The system will insert 06/2024 into the Beginning Date field. It will also insert $5,000 into the Beginning YTD and Accum fields. Change the amounts to $500. Post a manual journal entry directly in the general ledger to credit depreciation expense and debit AD for $4,500 in July.

          As a result, the asset generates the correct depreciation expense for the rest of its life, and it ties to your G/L as of the end of June and later. Note: if you calculate depreciation for the asset as of May or earlier, the asset will not appear on reports, as it now begins/exists as of the end of June 2024. The Beginning Date provides a visual indicator that the asset was adjusted. 

    2) Change to life to 10 years and reset to the PIS Date. Next, depreciate the asset through June to recalculate it through the last period posted. Post a manual journal entry directly in the general ledger to credit depreciation expense and debit AD for $4,500 in July.

         As a result, the asset generates the correct depreciation expense for the rest of its life and agrees to your G/L AD balance as of the end of June and later.

    I suggest adding a note about the change to the asset. The system will automatically record the change of life if the "Changed Book Information" History event is On (File > Company Utilties > History > Setup History...)

Reply
  • 0

    If AD refers to Accumulated Depreciation and the asset uses a Straight-line method, such as SF or SL, which has been posted to the General Ledger, there are two work-around options. However, both require a manual adjustment to your general ledger to remove the over-depreciated amount.

    Using your example and a $10,000 asset PIS in January with a 1-year life that has been depreciated for 6 months, to the end of June, the AD is $5,000 at the end of June. It should be $500.

    1) Change to life to 10 years and reset to the Beginning Date. The system will insert 06/2024 into the Beginning Date field. It will also insert $5,000 into the Beginning YTD and Accum fields. Change the amounts to $500. Post a manual journal entry directly in the general ledger to credit depreciation expense and debit AD for $4,500 in July.

          As a result, the asset generates the correct depreciation expense for the rest of its life, and it ties to your G/L as of the end of June and later. Note: if you calculate depreciation for the asset as of May or earlier, the asset will not appear on reports, as it now begins/exists as of the end of June 2024. The Beginning Date provides a visual indicator that the asset was adjusted. 

    2) Change to life to 10 years and reset to the PIS Date. Next, depreciate the asset through June to recalculate it through the last period posted. Post a manual journal entry directly in the general ledger to credit depreciation expense and debit AD for $4,500 in July.

         As a result, the asset generates the correct depreciation expense for the rest of its life and agrees to your G/L AD balance as of the end of June and later.

    I suggest adding a note about the change to the asset. The system will automatically record the change of life if the "Changed Book Information" History event is On (File > Company Utilties > History > Setup History...)

Children
No Data