When calculating depreciation, there are many variables (Cost, Depreciation Method, Recovery Periods, First Year Convention and the accuracy of the original calculation) involved that impact the depreciation amount calculated for each accounting period. This complexity causes differences between software packages. Since the previously calculated numbers have already been entered into your General Ledger, new software needs to adjust its calculation to “match” the existing total accumulated depreciation amount.
This is accomplished by calculating depreciation and then comparing its calculated amount to your existing total accumulated depreciation. The difference between the two numbers becomes the adjustment amount.
The key concept that sometimes causes confusion is the adjustment date. Since the new calculation needs to be adjusted to match your existing total accumulated depreciation, a date must be assigned. This ensures that the calculations match “as of” the adjusted date.
- Old Calculation $100
- New Calculation$ 90
- Adjustment$ 10
Your total accumulated depreciation “as of” the close of the selected accounting period becomes the “Opening Balance” in a new software package. Reports run AFTER the adjustment date will be accurate. Reports run BEFORE the adjustment date WILL NOT match original historical calculations, since the calculation is generated by the new software program.
Switching to a new software package for managing fixed assets and calculating depreciation can be a challenge. Make sure you choose a solution that supports adjustments to depreciation to ensure consistency with the numbers already posted to your General Ledger.
More information about Bassets eDepreciation software can be found at Bassets.net. While there you can set up a demonstration, download a free evaluation copy and get a personalized pricing estimate.