A.S.

Vamsi Krishna

Subject: Fixed Asset Explanation -

Dear Shukuru,

We have discussed following points for Fixed Assets.

1. To change the asset class of Items which has been wrongly assigned with another / New asset class.
2. To check about the Manual Depreciation and its impact on automatic Planned depreciation.

 Point # 1 :
o We cannot remove the asset class of items which has transactions linked. Because Asset Class being
the core of all transactions it is not possible to de assign.
o Alternate Way
 The items with incorrect class have to be Retired using Retirement / scrap / disposal
document
 Retirement / scrap / disposal document
o When an asset is procured the values are determined automatically by
system. Such as below.
o E.g. Asset APC – 1,200,000.00 ( 1.2 Million ) with asset life of 48 Months =
25000 / month Depreciation as per straight Lone Method.
o If the depreciation is done for say 5 Months which = 125,000.00 is
depreciated with Net Book Value remaining as 1,075,000.00
o Whereas the Retirement Value can be only 1,050,000.00 instead
1,075,000.00 or else on the value could be on the fly based on Market
Value.
o Hence after the Asset is retired, the Asset is flagged as INACTIVE meaning it
will not be used further in any transaction.
 To recreate same Items with new Asset Codes and to Upload Balances
o The creation of Items is same as earlier items created.
o To Upload Balances of those Assets as on July Ending.
 Uploading will be 2 stages
 Stage 1 – Values of those Asset Transactions in General
Ledger
 Stage 2 – Values of Assets to be updated in Asset Master
Data. Same like Excel Sheet provided earlier.
o Then you can start Depreciation thereafter.
 Point # 2 :
o When we depreciate an Asset more than the Value remaining in Net Book Value, System will not
allow to NBV to go below –ve value.
o About Manual Depreciation –
 Ordinary Depreciation in Asset Master data is the combination of Automatic Depreciation &
Manual Depreciation former being the system generated values and later being the
Transaction posted manually using the Manual Depreciation window.
 Through the Depreciation posted using Manual Depreciation does not actually depreciates
more than the Assets cost but only posts the depreciation earlier even before it useful life is
completed, not causing the Net Book Value fall below 0. Also system will validate the Asset
when making any transactions which will cause the asset not to fall below.

Follow below Scenario for further understanding.

1
I have created an asset with APC Value – 10,000.00 TZS
Created Asset Class with Useful Life as 5 Months.

APC Value – 10,000

AP Date – 28th July.
Depreciation Start Date – 30th August
Useful Life Ends at December 30th.

Refer Below Chart for Clarification.

Chat I – After Acquisition / Procurement below is the Value defined by system automatically before Depreciation is
started.

Planned Posted Automatic Manual

Period Depreciation Depreciation Depreciation Depreciation
1 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
2 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
3 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
4 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
5 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
6 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
7 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
8 TZS 2,000.00 TZS 0.00 TZS 0.00 TZS 0.00
9 TZS 2,000.00 TZS 0.00 TZS 0.00 TZS 0.00
10 TZS 2,000.00 TZS 0.00 TZS 0.00 TZS 0.00
11 TZS 2,000.00 TZS 0.00 TZS 0.00 TZS 0.00
12 TZS 2,000.00 TZS 0.00 TZS 0.00 TZS 0.00

Chart II – Below chart shows the Value after Manual & Automatic Depreciation.

Comparing both the charts we can see that in Chart II – The Values for Month 11 & 12 has been already reduced.
With the effect of Manual Depreciation, system automatically calculated the values and reduced the depreciation
time to be within 3 months.
With this it is clear that
System will not let the Asset Net Book Value to fall in credit / Negative balance.
System ensures that Value should not be Less than Net Book Value.

Planned Posted Automatic Manual

Period Depreciation Depreciation Depreciation Depreciation
1 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
2 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
3 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
4 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
5 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
6 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
7 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
8 TZS 2,000.00 TZS 6,000.00 TZS 2,000.00 TZS 4,000.00
9 TZS 2,000.00 TZS 2,000.00 TZS 2,000.00 TZS 0.00
10 TZS 2,000.00 TZS 0.00 TZS 0.00 TZS 0.00

2
 11 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00
12 TZS 0.00 TZS 0.00 TZS 0.00 TZS 0.00

Below is the Journal Entry Transaction for Retirement for Reference.

Example 1
G/L Acct/BP Code G/L Acct/BP Name Debit Credit
722006 Revenue Account for Retirement TZS 100,000.00
722007 Revenue Clearing Account TZS 100,000.00
120008 Vehicles TZS 100,000.00
722004 Leave with Expense NBV (Gross) TZS 100,000.00

Example 2
G/L Acct/BP Code G/L Acct/BP Name Debit Credit
722006 Revenue Account for Retirement TZS 2,100,000.00
722007 Revenue Clearing Account TZS 2,100,000.00
122008 Accumulated Depreciation Vehicles TZS 87,500.00
120008 Vehicles TZS 2,100,000.00
722005 Leave with Revenue NBV (Gross) TZS 2,012,500.00

Kindly please go through the explanations and let us know the way forward.

Best regards,

A S Vamsi Krishna
SAP Business One Consultant
Double Click Consulting Ltd
3rd Floor, IT Plaza, Ohio Street/Garden Avenue,
P.O.Box 20419, Dar es Salaam, Tanzania
Cell: +255 786836127
Web: http://doubleclick.co.tz