ERP 2.50:Functional Documentation/Financial Management/Assets
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Introduction
Wikipedia defines that in accounting, depreciation is a term used to describe any method of attributing the historical or purchase cost of an asset, across its useful life, approximately corresponding to their normal wear and tear. Typically fixed assets: the assets that are purchased for continued and long-term use in earning profit in a business, are selectively depreciated. This group includes land, buildings, machinery, furniture, tools, and certain natural resources e.g., timberland and minerals which may loose value due to natural or man-made deterioration. Governments often define the amount of depreciation allowed annually, according to the asset type. Some assets, such as land and buildings, are not normally depreciated as they can often gain in value.
Assets Depreciation in Openbravo
Openbravo allows you to create new assets that will be processed through a method of depreciation. When creating a new asset, the system will ask for the depreciation information: one method (time or percentage) and a value (number of years or months, or percentage rate). Then, the depreciation table can be created automatically, according to the number of years (or months), or the percentage rate.
Example 1
On 1st March 2008, a new car is acquired for the sales representative of the Company C. The car costs €30,000, plus taxes. The law allows to depreciate a 20% of the car's cost each year, so it is possible to depreciate €6,000 each year.
This asset is created in the application and it is configured to be depreciated 20% each year, starting on March 1st, 2008. The depreciation plan is created automatically as follows:
| Date | Depreciated amount | Remaining amount |
|---|---|---|
| 31-Dec-2008 | €5,000 | 25,000 |
| 31-Dec-2009 | €6,000 | €19,000 |
| 31-Dec-2010 | €6,000 | €13,000 |
| 31-Dec-2011 | €6,000 | €7,000 |
| 31-Dec-2012 | €6,000 | €1,000 |
| 31-Dec-2013 | €1,000 | €0 |
Assets Depreciation Posting
Each year or time period, one or more accounting entries must be created, with the depreciations of the assets corresponding to that period. When defining the asset, the accounting data is also established: which accounts to use for the depreciation accounting entries, etc.
Once the depreciation table of all the assets are created, the accounting entry associated to all the depreciations of the current year can be generated automatically. Additionally, depreciations of different assets can be grouped in just one accounting entry and everything is done automatically.