Sageline 50 Manual Accounting 2 Sem322 Compiled by: Ms.

Zakiya Abdul Samad

Topic 1: Depreciation
Depreciation is the reduction of the Book value (the value as recorded in the accounts) of an asset, for example because of wear and tear, or simply a reduction in the resale value. Sage Line 50 offers two accepted methods of depreciating assets, the ability to write-off the asset at any time (i.e. depreciation to zero value) and also the option to enter non-depreciating assets by assigning a zero depreciation rate. By assigning a zero depreciation rate to an asset, the asset will not depreciate when you run the month end procedure. The depreciation methods available are as follows: 1. Straight Line Method 2. Reducing Balance Method 3. Write-Off Alternatively, you may prefer to manually depreciate the value of your assets. Fixed Assets and Depreciation Depreciation of your fixed assets is an expense to your company that can be offset against the profits you make. At the same time the asset value of your company is being reduced by the same amount. Use this option to keep control of this depreciation and make sure that your companys profit & loss and balance sheet accounts are updated with accurate monthly depreciation values. The Fixed Assets register in Sage Line 50 makes it easy for you to keep a record of your fixed assets and set up their depreciation rates and depreciation methods. Every time you run the Month End routine, Sage Line 50 looks at these asset records and for each asset, posts the required amount of depreciation to the appropriate profit & loss account and posts the same amount to the accumulated depreciation account in the balance sheet. The Fixed Assets window gives you the options you need to keep track of your fixed assets, their rates of depreciation and their current value. As you create fixed asset records using the Record button you can add or edit all of your fixed asset details such as the reference, description, method of depreciation, depreciation rate, cost price etc. As each record is created, each asset appears as a single line in the Fixed Assets list

box. They will be depreciated by the amounts indicated on the record when you run the month end procedure. Select from this list the asset or assets you require and then choose the option you want to work with from the Fixed Assets toolbar. For information about how to set up your fixed asset records and depreciation select the Related Topics button below, for a list of topic titles. Fixed Asset Records The first time you use the Fixed Assets option, the Fixed Assets list box will be empty. Choose the Record button to add your assets. They will then appear in the Fixed Assets window one line per asset record. Scroll down the list in this window to see the assets you own, their cost, how much they have depreciated and their current book value. Use the Record option to enter information about your assets. In the Details tab you can enter a reference, description, serial number, location, etc. for your asset. In the Postings tab enter how you want an asset to be depreciated. For further information about fixed asset records see the related topics information below. To Add/Edit Fixed Asset Records 1. From the Modules menu, choose Fixed Assets Register. 2. Click Record. - The Fixed Asset Record window appears. 3. In the Details tab, enter the details of the asset: Before you can save this new record you now need to enter the nominal ledger posting details. You can enter the following fixed asset details: Asset Reference Every asset must be given a unique code for easy identification. Use up to 8 text characters, e.g. TRUCK01. Use the Finder button to see a list of any existing codes. Note: No spaces are allowed in the reference. Description Enter into these boxes (60 characters each), three lines of text to describe the asset. Serial Number For further information you can enter an assets serial number here.

Date Purchased Enter the date you purchased the asset.

Supplier A/C If you bought the asset from one of your suppliers then you can indicate that here by selecting the appropriate suppliers account code. Asset Category For reporting purposes you can categorise your fixed assets. Select from this drop-down list the Asset Category required. To set up your categories, open the Defaults menu and choose Fixed Asset Categories.
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Location/Empee Use this box to enter the assets location.

To Enter Fixed Asset Posting Details 1. 2. 3. 4. 5. From the Modules menu, choose Fixed Assets Register. Click Record. Click the Posting tab. - The posting information appears. In the boxes provided, enter your posting details. To save this fixed assets details and posting settings, click Save. To cancel the entry and start again, click Discard. 6. To exit from the fixed asset record, click Close or use the scroll buttons to move to another record. You can enter the following posting details: Department Select the department from the drop-down list, that you want the depreciation transactions to be assigned to. Depn Rate Enter here the annual percentage rate of depreciation. If you are calculating the depreciation using the straight line method. the value you enter here will be divided by twelve to calculate the monthly depreciation. For example, if you want to depreciate an asset completely over four years using the straight line method, then you would enter 25 (%) here. In this case, each month, the asset is depreciated by 2.0833% until after four years the book value is zero. For an item costing 10,000 this means that a depreciation of 208.33 would be posted for 48 months. You can enter a non-depreciating fixed asset, for example property, by entering a zero depreciation rate here. Cost Price Enter here the net price you paid for the asset. If you have selected to depreciate this asset by the straight-line method then it is this value that is used to calculate the depreciation amount.

Depn B.S. N/C Enter here the nominal ledger balance sheet account code that you want to use to store the depreciation postings. Every time an asset is depreciated, the amount of depreciation is posted to this account as a credit posting. Four depreciation accounts have already been set up for you in the balance sheet section of the nominal ledger, e.g. 0051 Motor Vehicles Depreciation.

Depn P&L N/C Enter here the nominal ledger account code that you want to appear in your profit and loss report to show the cost of depreciation. Every time an asset is depreciated the value of that depreciation is added to this account code as an expense to the company (debit posting). Four depreciation accounts have already been set up for you in the profit & loss section of the nominal ledger, e.g. 8003 Vehicle Depreciation.

Book Value Enter here the current book value. If the asset is brand new, then this should be the same as the Cost Price. If the asset has already depreciated then change this to show the current value, i.e. cost price less depreciation. If you have selected to depreciate this asset by the reducing balance method then it is this value that is used to calculate the depreciation amount. Sage Line 50 automatically reduces this value by the depreciation amount during the month end procedure. Once a depreciation posting has been made by the Month End routine for this asset, you will not be able to change the Cost Price or the Book Value.

Depn Method Select the depreciation method that you want to apply from this drop-down list box. Once you have posted the first months depreciation you cannot change this depreciation method to anything other than Write Off. The following information appears but cannot be edited: Next Depn This box shows the value of next months depreciation. Depn to Date The total amount of depreciation posted by Sage Line 50 so far (for this asset). Date Last Posted The date of the last depreciation transaction.

Depreciation Methods Straight Line Method This method depreciates an asset by a fixed percentage every month until the asset value is reduced to zero. The fixed percentage is calculated from the original cost price of the asset. For example, if you enter an asset and with a Cost Price of 10,000 and you want this to be depreciated over a four-year period then you would enter 25% as the annual Depreciation Rate. Every month exactly the same amount will be depreciated from the assets value until it is reduced to zero. This is shown in the table below:

Asset A: Straight Line Depreciation Method

Cost Price

Dep. Rate

Dep. Amount

New Book Value

Year 1 Year 2 Year 3 Year 4

10,000 10,000 10,000 10,000

25% 25% 25% 25%

2,500 2,500 2,500 2,500

7,500 5,000 2,500 0

Sage Line 50 is designed to depreciate your assets every month, so in the case above, the annual depreciation rate of 25% is simply divided by twelve to give a monthly depreciation rate of 2.08%. At the end of each year this monthly rate amounts to 25% of depreciation just the same. Reducing Balance Method This method depreciates the value of an asset by a fixed percentage each year just like the straight-line method but this fixed percentage is applied each time to the new reduced book value of the asset. Theoretically, the book value will never reach zero, but for all practical purposes, the write off value of an asset is reached by using a realistic percentage. For example, if you have an asset worth 10,000 which is to be depreciated at the rate of 25% a year. The annual depreciation calculation using the reduced balance method is as follows:

Asset A: Reduced Balance Depreciation Method

Book Value Year 1 Year 2 Year 3 Year 4 10000 7500 5625 4219

Dep. Rate 25% 25% 25% 25%

Dep. Amount 2500 1875 1406 1054

New Book Value 7500 5625 4219 3165 etc.

You can see from this example that, in comparison to the straight-line method, the reducing balance method takes longer to depreciate an asset using the same annual depreciation rate. In this example, after four years at 25% the asset has been written off by the straight-line method but has a remaining book value of 3165. Because Sage Line 50 calculates the depreciation every month the annual rate of depreciation is calculated as a reducing balance monthly. In the example above, the first annual depreciation amount of 2,500 will occur, but the first month will show a greater value of depreciation than the next and so on.
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Write-Off Select this depreciation type to make one last posting that depreciates the remaining value of the asset, whatever it is, in one go. The Book Value is reduced to zero and has therefore been effectively written off in your accounts. Manual Depreciation Although the Sage Line 50 has a Fixed Assets option that can calculate depreciation and post the journals to the ledger, you may prefer to calculate the depreciation manually. For example, if you only want to post depreciation once a year as opposed to monthly, or if the method of depreciation you use is something other than Straight-Line, Reducing Balance or Write-off you may prefer to enter depreciation manually. Once you have calculated the depreciation charge for your fixed assets, posting your depreciation could not be easier. Sage Line 50s default depreciation nominal accounts are as follows; Profit and Loss accounts; 8001 Plant and Machinery Depreciation 8002 Furniture/Fittings Depreciation 8003 Vehicle Depreciation 8004 Office Equipment Depreciation Balance Sheet 0021 Plant and Machinery Accumulated Depreciation 0031 Office Equipment Accumulated Depreciation 0041 Furniture/Fittings Accumulated Depreciation 0051 Motor Vehicle Depreciation If these are not the nominal accounts you use, or you do not wish to use all of these accounts, you can edit the nominal accounts before you start. For example, you may wish to post to only one profit and loss account, or you may not need all of the different types of assets that have been set up as a default.

Manual Depreciation Example You can manually post a depreciation charge against a fixed asset such as a vehicle or machinery. This example shows how to post a 50 depreciation value against a company car or van. 1. Change your program date to the last day of the month or period you are posting the depreciation for, to ensure the journals are posted on the correct day. 2. Open the Nominal Ledger then click Journals. The Nominal Ledger Journals window appears. 3. Insert the following Journal Entries against the following nominal codes; N/C Name Details T/C Debit Credit 8003 Motor Vehicle Profit & Loss T9 50.00 Deprec. Charge 0051 Motor Vehicle Balance Sheet T9 50.00 Deprec. Charge 4. Click Save. The journal entries are posted to the appropriate nominal codes, which will be reflected on the Profit and Loss and Balance Sheet. To Post Depreciation using Journal Entries 1. Change your Program Date to the last day of the month or period you are posting the depreciation for, to ensure the journals are posted on the correct day. 2. Open the Nominal Ledger then click Journals. The Nominal Ledger Journals window appears. 3. Insert your depreciation totals against the appropriate nominal codes, credits against the Balance Sheet nominal codes, debits against the Profit and Loss nominal codes. See the Manual Depreciation Example 4. Click Save. The journal entries are posted to the appropriate nominal codes, which will be reflected on the Profit and Loss and Balance Sheet.

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