How do I account for Depreciation in LedgerSMB?
NOTE: LedgerSMB has a Fixed assets module as of 1.3. The FAQ below is out-dated.
LedgerSMB does not have a built-in assett tracking / depreciation feature. Depreciation can be managed manually using General Ledger Transactions. You should probably confirm this with your accountant, but the basic procedure (kindly suggested by Tony Fraser) is, assuming a computer asset over 5 years:
Set up 3 accounts:
- An asset account such as "Computers"
- An asset account such as "Accumulated Amortization, Computers" that is normally a negative balance therefor it is a contra account
- An expense account such as "Computer Depreciation"
Upon purchasing a depreciable asset (in this case, a computer):
|On purchasing the computer|
|End of Year 1|
|Computer Depreciation||400.00||(40% of $1000)|
|Accumulated Amortization, Computers||400.00|
|End of Year 2|
|Computer Depreciation||240.00||(40% of $600)|
|Accumulated Amortization, Computers||240.00|
|End of Year 3|
|Computer Depreciation||144.00||(40% of $360)|
|Accumulated Amortization, Computers||144.00|
|Bank Account||75.00||(sale of computer)|
|Accumulated Amortization, Computers||784.00||(reversing entry)|
|Computer Depreciation||141.00||(residual value)|