Money
Fixed assets and depreciation
A register that reconciles to the ledger: what is capitalised, what it is worth today, and a schedule an accountant can reproduce.
Something bought once and used for years is not this year's expense. It goes on the balance sheet and is written down month by month, and this is where that happens — each charge posting a real journal entry rather than being a figure on a spreadsheet.
This is not the equipment register
Assets and equipment answers who is holding the laptop — custody, condition, getting it back from a leaver — and sits behind an HR role. This answers what the balance sheet says it is worth, and sits behind finance:view. Most fixed assets were never issued to anybody (a building, a lease, a server) and most issued assets are below anybody's capitalisation threshold. They are linked, one to one, and the picker offers only equipment not already capitalised.
Nothing is assumed
No standard useful life, no default method, no residual of zero on something nobody said anything about. Those are policy decisions with a tax consequence, and a plausible default is one that gets accepted without being read.
| You say | Meaning |
|---|---|
| What it cost | The figure that goes on the balance sheet. |
| What it will be worth at the end | Often nothing. Never assumed to be. |
| How it is written down | The same each month, or a percentage of what is left. |
| Over how many months | Its useful life, which is also what stops a reducing balance. |
| When it entered service | Not the purchase date. Something bought in March and commissioned in June is written down from June. |
| Whether the first month is charged | Charge the month it starts, or begin the month after. |
Two first-month conventions, and deliberately no third
Pro-rata by day is a real convention somewhere and is absent rather than approximated: which one applies is a jurisdiction's decision, and a schedule computed under the wrong one misstates every period of every asset quietly.
The schedule
The whole schedule is worked out at once, and the posting takes its figure from it. An accountant asked why March is what it is has to be able to reproduce it, and a schedule computed one way on a screen and another way when it posts is one they cannot.
The last period absorbs the rounding
100.00 over three months is 33.333…. Charging the rounded figure every month either leaves a cent on the books for ever or writes the asset below what it is meant to be worth — and both are found years later by somebody trying to dispose of it. The final charge is whatever is left, which is what a person doing it by hand does.
Reducing balance still ends. It approaches the residual and never reaches it, so the useful life is what stops it and the last period writes the remainder off. Without that an asset depreciates by fractions of a cent for ever and never leaves the register.
Posting it
One entry per asset per period, dated the last day of the month: the expense account is debited and accumulated depreciation is credited.
- One entry per asset, not one for the month. Two assets depreciating into different expense accounts already produce different lines, and a single entry would make reversing one impossible without reversing the other — which is exactly what somebody needs when one asset's life turns out to be wrong.
- Safe to run twice. The ledger's own one-posting-per-source rule is the guard, so firing it four times in a morning posts once — and so does firing it after somebody posted a month by hand.
- A closed month refuses, and says which. Depreciation for a month already reported on is a prior period adjustment, which is a decision somebody makes rather than a run that quietly reopens the books.
- A refusal on one asset never stops the rest — but it does stop that asset, because later periods would post into a hole.
Once something has been charged
The schedule is fixed
Cost, life, method, residual and the convention are every input to it, so changing one restates a figure already in the ledger — and the register would disagree with the journal with nothing on screen to say why. The name and the description stay editable, because neither decides anything. Correcting a wrong life means reversing what was posted.
An asset that has been charged cannot be deleted either, only disposed of. One registered by mistake and never charged is simply removed.
Disposal
The cost comes off, the accumulated depreciation comes off, and what it was still worth goes to a disposal account. When the proceeds arrive they are explained against that same account, and the balance left sitting there is the gain or loss.
Why the gain is not posted at disposal
Because the money has not arrived. Posting a gain would recognise a receipt that has not happened, and would have to guess which bank account it landed in. What you record as expected proceeds is for the register — the two differing is the ordinary case.
Which account the gain or loss belongs in is asked at that moment rather than defaulted. Where it goes is a chart decision, and picking one silently puts a figure somebody will find in a place they did not choose.
Reading the register
Cost, written down, and worth now, per asset. The written-down figure is summed from what posted, never from the schedule — the two differ whenever a month was closed before the run reached it or an entry was reversed, and a register reading from the plan would state a book value the ledger disagrees with, on the one screen whose job is to reconcile to it.