Fixed assets and depreciation

Why it matters

A vehicle or a machine is not expensed on the day of purchase: its cost is spread over its useful life. Genuka keeps the register of these assets, calculates their depreciation schedule and posts the depreciation charges.

Summary

A fixed asset is an item the company keeps and uses over the long term: vehicle, equipment, furniture, machinery. It is not expensed all at once; its cost is spread over its useful life, which is depreciation. Genuka keeps the register of these assets, calculates their depreciation schedule and posts the depreciation charges.

The logic, in one sentence

A computer bought for 600,000 F and used for 3 years does not cost 600,000 F in the first year: it costs 200,000 F a year for three years. Expensing it entirely at purchase would crush the result of the year of acquisition and artificially flatter the next two.

Prerequisites

• View the register: accounting.fixed_assets.view. Create, edit and delete an asset, manage categories and post depreciation charges: accounting.fixed_assets.* (or full accounting rights).

Steps

1. Menu › Finances › Accounting › Fixed assets (/accounting/fixed-assets), button New asset.
2. Identity: name, description, category. The reference is generated automatically (IMMO-0001…).
3. Valuation: acquisition date, acquisition cost, residual value (often zero).
4. Depreciation: in-service date (it is this date, not the purchase date, that starts depreciation; if left empty, it takes the acquisition date). Then the Depreciable box, the method and the useful life in months. A category pre-fills the useful life and the accounts.
5. The accounts: asset account (class 2), depreciation account (class 28), expense account (class 68). Without a category, you need at least the asset account; Genuka derives the other two from the SYSCOHADA chart when it can.
6. Advanced options: the posting mode of depreciation charges for this asset (see below).
7. Save: Genuka generates the depreciation schedule, one line per month, with the charge, the accumulated amount and the net book value at each due date. The asset's page displays it, with the gross value, the accumulated depreciation and the net book value.
8. Depreciation charges are then posted as entries according to the chosen mode, or with the Post depreciation button, which posts all charges due up to the chosen date.

Saving an asset from the screen does not post any purchase entry: Genuka only posts the depreciation charges.

Categories (/accounting/fixed-assets/categories, Fixed assets › Categories) carry the default accounts and useful life for each type of asset. Load SYSCOHADA defaults creates them all at once.

How the calculation works

Depreciation is straight-line: the depreciable amount (acquisition cost minus residual value) is spread equally over the useful life.

Two details that explain the amounts shown:

• The first month is prorated from the in-service date, on a 30-day basis. An asset put into service on the 16th of the month only depreciates half a monthly charge that month; the remainder is carried to the last month of the schedule.
• The last line absorbs rounding, so that the sum of all charges equals the depreciable amount exactly, to the cent.

When depreciation charges are posted

Each asset follows the company's mode ("Company default", which is Manual as long as nothing else is set) or its own Posting mode, in the advanced options of its page:

Each line of the schedule is Planned, Posted or Skipped (zero amount).

Statuses of a fixed asset

Fields & options

Edge cases & common errors

• "A depreciable asset needs a depreciation account, an expense account and a useful life." Choose a category or fill in the accounts and the useful life.
• No depreciation schedule. The asset is marked not depreciable (normal for land), or its residual value equals its acquisition cost.
• "The depreciation schedule can no longer be changed: charges have already been posted." As soon as a charge is posted, the cost, useful life, in-service date, method and accounts are frozen, and Regenerate schedule is refused. To correct, post a manual entry.
• "This asset cannot be deleted": same reason, charges have already been posted.
• Confusing purchase date and in-service date. Equipment bought in November and installed in January starts depreciating in January. Using the purchase date shifts the whole schedule.
• Booking a big purchase as a simple expense. It will never appear in the balance sheet and will crush the year's result. The threshold above which you capitalize depends on your country and your policy: ask your accountant.
• Residual value equal to acquisition cost. The depreciation basis is zero: no schedule is produced.

FAQ

Can I change the useful life afterwards? Yes, as long as no charge has been posted: the schedule is then recalculated. After that, the change is refused.

What do I do when I sell or scrap the asset? Genuka does not offer disposal or scrapping yet: no screen takes an asset out of the register. Post the disposal as a manual entry (miscellaneous operations) with your accountant: sale price, removal of the gross value and accumulated depreciation, plus or minus the gain or loss. Be careful: the asset stays "Active" in the register, and Post depreciation would keep posting its remaining charges; in Manual mode, at least, no automatic task posts them.

Does Genuka handle declining-balance depreciation? No: the only method is straight-line. Any other method is handled with manual entries in miscellaneous operations.

See also

• Understanding Genuka accounting
• The chart of accounts
• Record, post and correct an entry