Indicated in the form of depreciation expenses on the income statement, depreciation is recognized after all revenue, cost of goods sold (COGS), and operating expenses have been indicated, and before earnings before interest and taxes, or EBIT, which is ultimately used to calculate a company’s tax expense.
The total amount of depreciation expense is recognized as accumulated depreciation on a company’s balance sheet and subtracts from the gross amount of fixed assets reported. The amount of accumulated depreciation increases over time as monthly depreciation expenses are charged against a company’s assets.
FA Setup: Create FA Setup with Default COMPANY LAW
Depreciation Books: Create Depreciation Book code Income Tax with Depr. Threshold Days and Depr. Reduction %
FA Journal Setup: Set User permission for FA Batches
FA Blocks: Set FA Blocks with Depreciation % and Additional Depreciation % (If apply)
FA Card: Create Fixed Asset Card with Add. Depr. Applicable (If required)
FA Depreciation Calculation for First Year
If Depreciation Starting Date and Depreciation Posting Date is within 180 days
- System Calculate Depreciation for first year is HALF
- System Calculate Additional Depreciation for the first year is HALF
- Example: Depreciation 15% + Additional 20% = (35% / 2))
If Depreciation Starting Date and Depreciation Posting Date is more than 180 days
- System Calculate Depreciation for first year is FULL
- System Calculate Additional Depreciation for the first year is FULL
- Example: Declining Balance 15% + Additional 20% = 35%
FA Depreciation Calculation After First Year
- From Second Year, Additional Depreciation will not calculate
- Example: Declining Balance 15%
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