Tag Archives: Adjustments

Bassets eDepreciation – Adjusting Accumulated Depreciation

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A standard, and extremely useful, feature of Bassets eDepreciation is adjusting accumulated depreciation. This allows the user to match the data that has been imported into eDepreciation with the calculations of the user’s previous fixed asset system. Simply put, the user can move forward with eDepreciation while retaining the prior accumulated amounts that have been booked to the general ledger at the close of the last accounting period. eDrepreciation automatically performs this operation on all incoming assets during a data import to ensure accurate calculations for total depreciation.

Watch this video to learn more.

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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.

Establishing the Correct Cost Basis When Calculating Depreciation

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Correctly calculating depreciation on an asset requires the determination of an accurate cost basis.  Often, companies may only use the purchasing price of the asset as the basis for calculating their depreciation costs.  However, doing so fails to account for additional costs that should be depreciated along with the actual cost of the asset.  Some additional costs that should be included are installation fees, shipping and handling fees, and applicable taxes.  Also, for real property assets, additional costs can include title insurance, recording fees, survey charges, and settlement and commission fees.  (Note:  there are specific rules governing what asset types can be allotted additional costs including assets acquired by gift/trust, purchase/contract, inheritance, etc.)

Thus, the simple definition for establishing a cost basis is:
Cost Basis = Purchase Price of Asset + Additional Costs Associated with the Asset

To clearly illustrate the importance of properly determining a cost basis, let’s look at the following example:  Consider a computer server with a sales price of $5,000.  However, let’s now include additional costs.  Suppose there are taxes of $350, a shipping and handling fee of $75, and installation charge of $200.  Once these are added to the purchasing cost of $5,000, the actual cost basis of the asset becomes $5,625.  Thus, there now becomes an additional $625 that can be depreciated over the life of the asset.  Below is a comparison of the depreciation allocation with a cost basis of $5,000 vs. $5,625.  For this example, we will assume a salvage value of $0 and a useful life of 5 years and the Half Year Convention.

Comparison of Depreciation Allowances Using Different Costs Bases

As can be seen by the example above, it is important that you make sure to determine the correct cost basis before starting any calculation.  Otherwise, it could cost your company with incorrect deduction amounts. If you have any questions or need help with a specific example, leave a note in the comments and we will help ensure you establish the proper cost basis for your fixed assets.

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.

Making Adjustments to Depreciation

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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.

Example:

  • 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.