Open Door Technology

Fixed Asset Disposals
Salvage
Salvage value represents the residual value of a fixed asset when it can no longer be used. You can post the salvage value of an asset from a purchase invoice or from the FA Journal when you post the acquisition cost.

To post salvage value from a purchase invoice, you must ensure that you have added the Salvage Value field to your purchase lines, using the View, Show Column function. You can then enter the salvage value in the field as a positive or negative number and post the invoice as usual.

To post salvage value with an acquisition cost through the FA Journal, you ensure that you have added the Amount field to the journal lines using the VIEW→SHOW COLUMN function. You can then enter the salvage value as a negative amount in the field and then post the lines as usual.

Note that if the asset contains the salvage value, Depreciate below Zero means depreciate below the salvage value.

The salvage value reduces the depreciation base and therefore reduces all depreciation amounts. The final rounding amount only reduces the last depreciation amount. In the following example report, the salvage value has caused a reduction in the yearly depreciation of 200 each year. If there was no salvage value, the depreciation would be 1,200 per year, not 1,000. The attached report 1 illustrates this method.

Final Ending Book Value
This is often used to represent a fully depreciated asset that is still active. Using a salvage value allows a reduction in depreciation over the life of the asset. However, some local laws allow only the reduction of the last depreciation amount. You can do this by inserting an ending book value in the FA depreciation book. If you use this feature with most of your fixed assets, you can set up a default ending book value in the relevant depreciation book. The attached report 2 illustrates this method.

Disposal of Fixed Assets
When you sell or otherwise dispose of a fixed asset, the disposal value along with any related gain or loss must be posted. A disposal entry must be the last entry posted for an asset, so if you have related disposal costs that you want to record for an asset, you should record these in the FA G/L Journal before the actual disposal entry. You post disposal entries through the FA G/L Journal, the FA Journal or a sales invoice.

You set up the disposal method for each depreciation book on the General tab of the Depreciation Book Card in the Disposal Calculation Method field. The program can handle disposals using either the Gross or Net method.

When you use the Net method, you post to either a disposal loss or gain account. This is the most common method used.

When you use the Gross method, you post to a book value gain or loss account and to a sales gain or loss account. When you enter the sales price in a journal, the program calculates the gain or loss on the disposal and calculates all other relevant entries. The gain or loss amount will be calculated from the difference between the sales price and the book value.

The following examples include both methods. Use the following amounts:

Acquisition Cost 100,000
Acc. Depreciation 70,000
Appreciation 40,000
Book Value 70,000 (Acq. Cost - Acc. Deprec. + Apprec.)
Sales Price 20,000
Loss 50,000 (Sales Price - Book Value)
When you post the disposal of the fixed asset using a journal or sales invoice, the program calculates the gain or loss on disposal and creates the other entries. The following examples show which amounts are posted to various accounts when you post disposal of a fixed asset. The result of both methods is the same in the financial statement.

Posting the Disposal Through the FA journals
You can post disposal through the FA G/L Journal. Fill in the line with the appropriate information and be sure to enter the disposal amount as a credit or negative number. Post as you normally would.

You can post the FA disposal in combination with a VAT posting group. The program automatically creates the Sales VAT amount. If you want the program to post the sales VAT automatically, you must enter the gross amount in the Amount field.

To see the results of your journal entry, open the ledger entries from the depreciation book of the asset. You can use the Navigate function to see the actual entries made in the general ledger. This shows the posted disposal entry. Recording a disposal for an asset with no integration to the general ledger should be done in an FA Journal. You basically record the same information as in the FA G/L journal.

If you 'trade-in' an asset, you must record both the sale of the old asset (the disposal) and the purchase of the new one (the acquisition). This kind of transaction cannot be recorded as a single transaction.

NOTE: If an asset is sold in the current fiscal year, and you record the asset as inactive, then the asset will not appear in the Fixed Asset - Book Value 01 report for the current fiscal year. This is incorrect. Generally do not use the Inactive field until 1-2 years after the last transaction on the asset.

Partial Disposal
If you sell or otherwise dispose of part of an asset, you must split up the asset before you can record the disposal transaction. In other words, you must split the asset into two or more assets before you can dispose of part of it. This is done as a "Fixed Asset Reclassifications."

Disposal from a Sales Invoice or a Sales Order
You can create a sales invoice and on the line, in the Type field, select, Fixed Asset. This makes it easier to invoice an asset to a customer. The disposal of the asset works in the same way as a disposal through a FA G/L journal.

Use the VIEW→SHOW COLUMN function to add the Depr. until FA Posting Date field to the sales lines in the Sales Invoice window. It may be necessary to post a final depreciation entry in connection with the disposal. This depreciation amount relates to the period from the date in the FA Posting Date field of the last FA ledger entry for the asset to the date of the disposal. By posting this final depreciation entry, you obtain an accurate gain or loss calculation.
To have the program automatically post this final depreciation entry, insert a check mark in the Depr. Until FA Posting Date field.

The program automatically fills in the FA Posting Type with Disposal, since there is only one FA Posting Type for assets in sales invoices.