The Depreciation

Content was last updated in 06.22.08-00

Revision History

Depreciation is supported for both serial and non-serial items. Depreciation methodology supported is the Straight-line method and declining balance method.

Implementing Depreciation in R2:

• Selecting Depreciation conventions

• Defining Depreciation for Rental Inventory

• Posting Depreciation

• Generating Depreciation Report

To Select Depreciation conventions (Configuration)

1. Begin at the Configuration window.

2. Select the Accounting tab.

The Configuration window displays

1. Depreciation Convention dropdown values:

2. Full on Purchase and Zero on Sale: Use this feature to apply depreciation in the month of purchase and zero depreciation in the month of sale or disposal.

3. Zero on Purchase and Full on Sale: Use this feature to apply depreciation for the item excluding the month of purchase including the month of sale or disposal.

4. Half on Purchase and Half on Sale: Use this feature to apply half-month depreciation in the month of purchase and half- month depreciation in the month of sale.

2. Financial Start Month: Use this field to select the financial start month of the year.

3. Depreciation Type: Use this field to select the type of depreciation that is, Straight line or Declining Balance. Equation used for calculating depreciation in Straight Line Method is Depreciation = (Cost - Salvage Value) / Life

4. Multiplication Factor: Use this field to type the factor used for calculating the depreciation of type Declining Balance. Equation used for calculating depreciation by Declining Balance Method is Depreciation =((Cost – Salvage Value) / Life)* Multiplication Factor

5. Inventory Costing Convention for Qty Items (Non-Serial): Use this field to select the depreciation type for Non-serial Items. The list contains Average, FIFO, and LIFO depreciation types

To Define Depreciation for Rental Inventory (Maintenance)

User can set if an item depreciable or not in the 'Item edit' window.

In Allow group box,

• if depreciation is selected, item can be depreciated and user can view the depreciation details and work on depreciation related functions.

• If the depreciation box is clear, item cannot be depreciated.

To select the Depreciation Group:

Group can be tagged to depreciation in the Groups group box.

1. Click the import icon next to the depreciation text box. The Depreciation group dialog appears.

2. Existing group can be selected by double clicking on the line of the group.

To add a new Depreciation Group

1. Click Add.

2. Deprecation Group List dialog displays.

3. Enter the unique ID. This is the mandatory field to save the depreciation group.

4. Select the Depreciation type from the dropdown values.

   • Fixed: If Fixed type is selected, then Rent% field will be disabled.

   • % of Rent:  If % of Rent type is selected, then Sal. % field will be disabled.

5. Enter the Life values for the group. This is the mandatory field to save the depreciation group.

6. Type the Salvage Value%, which is used to calculate the salvage of items.

7. In GL Accounts, select the Depreciation, Acc Depreciation, and Write Off for the group.

 The GL Accounts entered at the item level takes higher priority than the one entered at this group level. 

8. Click OK.

The entered details will be displayed in the Depreciation Group dialog.

To edit a Depreciation Group

1. Select the group line in the Depreciation Group.

2. Click Edit or alternatively double click the group line. Depreciation Group dialog box displays.

3. Edit the required fields.

4. Click OK.

To View Depreciation of items

Depreciation of complete stock of an item can be viewed by clicking on Depreciation in the list of actions in the left panel. The depreciation dialog displays:

This gives the information of the month of depreciation that is the Period, Net Book Value (NBV), Depreciated Value

• Salvage Value will be calculated depending on the salvage value % mentioned in the selected depreciation group in Item Edit screen.

• User can view the consolidated Net Book Value on the Item Edit screen as on the closure period of the Prior posted Depreciation Batch in the Invoicing module.

To view the depreciation of serial asset item

Depreciation of each Serial asset can be viewed by clicking Depreciation in the Asset Edit window.  

The Life and Salvage Value of the item given while scanning the item to the Inventory are reflected in the Life and Salvage Value boxes. These can be edited.

Net Book Value (NBV) and As On boxes display the NBV of the asset based on the latest posted depreciation batch for the asset.

GL code for Depreciation, Accumulated Depreciation and Write Off can be selected from the Asset Edit window too.

To view depreciation for non-serial items

Non-Serial Items are received in batches. Cost, Salvage Value, Quantity, and Life of the item are mentioned in the Scan Item window.

Click Depreciation on the Item Edit window, Depreciation dialog displays the depreciation of items for the life period mentioned while receiving. Net Book Value and Depreciated Value for appropriate month is displayed as shown below.

  Net Book Value for the month is calculated according to the settings in the Configuration module. 

FIFO/LIFO and Average methods for non-serial items

In FIFO non-serial items are sold or marked as retired then that many quantity of the items will be marked as Sold or Retired starting from the oldest batch or the ones first received. The same will be reflected on the depreciation also.

For example#1: If a non-serial item VIDEOTAPE; FUJI 10 MIN.OXIDE has 15 quantities as on 15th August. 5 quantities have been received on 1st July and 10 quantities have been received on 1st August.

If 7 quantities of VIDEOTAPE; FUJI 10 MIN.OXIDE is marked as retired on 15th August then, first 5 quantity of VIDEOTAPE; FUJI 10 MIN.OXIDE received in first batch i.e., on 1st July will be marked as Retired and then 2 quantity of VIDEOTAPE; FUJI 10 MIN.OXIDE received in second batch i.e., on 1st August will be marked as Retired. It works similarly when item is sold also.

In LIFO non-serial items are sold or marked as retired then that many quantity of the items will be marked as Sold or Retired starting from the newest batch or the ones recently received. The same will be reflected on the depreciation also.

For example#2: If a non-serial item VIDEOTAPE; FUJI 10 MIN.OXIDE has 15.

quantities as on 15th August. 5 quantities have been received on 1st July and 10 quantities have been received on 1st August.

If 12 quantities of VIDEOTAPE; FUJI 10 MIN.OXIDE is marked as retired on 15th August then, 10 quantities received on 1st August will be marked as Retired, 2 items received on 1st of July are marked as retired. It works similarly when item is sold also.

In Average method average of cost of all the items is used to calculate depreciation.

 User can see the quantities of items marked as Retired or Sold and the Life, Salvage Value and Net Book Value as on date of each batch, on Receive Log dialog. 

To Post Depreciation (Invoicing)

Depreciation is calculated on the basis of owner site.

For Example:

Asset LIGHT; PEPPER 100W/200W is purchased for $2,000 for Dallas on 1/1/2001.The depreciation profile for Dallas will show all depreciation of Asset A from date of purchase to current month.

Consider after 3 years, the asset is transferred to Chicago. Now, the Owner site will be Dallas and the current site will be Chicago. If a depreciation report is run for Chicago, it would show the depreciation history based on Dallas and not on Chicago.

Now, if the Owner site is changed manually to Chicago, and a depreciation report for Chicago is run, it would show the depreciation history based on Chicago because, Chicago is the Assets Owner Site.

Depreciation for items is posted in the Depreciation tab of the Invoicing window.

To add a depreciation batch

1. Click the new icon in the tool bar when the Depreciation tab is active in the Invoicing Module.

2. Depreciation batch window displays as shown below.

3. Type Batch Name and Closure period.

4. Click the Create icon in the tool bar. The depreciation of the items from the last posted date to the closure period will be listed in the grid.

5. Exit from the Depreciation batch window.

6. Search for the newly created batch in the Depreciation tab of Invoicing module.

7. Select the batch line, from the menu options select Actions > Post Batch.

8. Post Depreciation dialog displays.

9. Select the options Create Export File and Report.

10. Click OK.

The posted depreciation report -  R2 Posting Register will be displayed.

   Closure Period mentions the month and year till which the depreciation of the items has to be considered for the present batch

• To view each serial asset item, expand the line.

• To view details of the non-serial items for the batch expand the line.

• Empty batches and the batches created with items but not posted can be deleted.

To Generate Depreciation Reports

Depreciation Reports can be generated from Reports Module, the available reports are

• Asset Disposal Report

• Depreciation by Owner Site

• Depreciation by Current Site

• Depreciation Summary by Owner Site

• Depreciation Summary by Current Site