Home > Financial Accounting, OpenERP > Asset Management by Simple Declining Method Manually

Asset Management by Simple Declining Method Manually

Following are the information available for Asset Management

Asset Name: my_asset

Original Cost: 17000

Life: 5

Depreciation Ratio: 5%

WDV Balance: 13154.28

Start Financial Year: 2011

End Financial Year: 2015

Method: Simple Declining Method (Neither 200% nor 150%)

Step 1: introduce three different account for my_asset in your chart of account.

  1. Cost of my_asset (nature asset)
  2. Accumulated Depreciation of my_asset (nature asset)
  3. Depreciation Expense of my_asset (nature expense)

Step 2: At the end of financial year 2011 (end of 1st year of life) calculate depreciation expense i.e. 5% of Book value (17000).

Depreciation Expense of my_asset= 5% of 17000 = 850

Accounting Entries:

Depreciation Expense of my_asset (Dr) 850

Accumulated Depreciation of my_asset (Cr) 850

Balances:

Cost of my_asset (Dr Balance) = 17000

Accumulated Depreciation of my_asset (Cr Balance) = 850

Depreciation Expense of my_asset (Dr Balance) = 850

Book Value of my asset=Cost of my_asset(17000)-Accumulated Depreciation of my_asset(850)

Book Value of my asset=> 16150

Step 3: Transfer balance of ‘depreciation expense of my_asset’ to ‘profit and loss acc’ at 31/12/2011.

Accounting Entries:

profit and loss acc (Dr) 850

Depreciation Expense of my_asset (Cr) 850

Balances:

Cost of my_asset (Dr Balance) = 17000

Accumulated Depreciation of my_asset (Cr Balance) = 850

Depreciation Expense of my_asset (Dr Balance) = 0

Step 4: At the end of financial year 2012 (end of 2nd year of life) calculate depreciation expense i.e. 5% of Book value (16150).

Depreciation Expense of my_asset= 5% of 16150 = 807.5

Accounting Entries:

Depreciation Expense of my_asset (Dr) 807.5

Accumulated Depreciation of my_asset (Cr) 807.5

Balances:

Cost of my_asset (Dr Balance) = 17000

Accumulated Depreciation of my_asset (Cr Balance) = 1657.5

Depreciation Expense of my_asset (Dr Balance) = 807.5

Book Value of my asset=Cost of my_asset(17000)-Accumulated Depreciation of my_asset(1657.5)

Book Value of my asset=> 15342.5

Step 5: Transfer balance of ‘depreciation expense of my_asset’ to ‘profit and loss acc’ at 31/12/2012.

Accounting Entries:

profit and loss acc (Dr) 807.5

Depreciation Expense of my_asset (Cr) 807.5

Balances:

Cost of my_asset (Dr Balance) = 17000

Accumulated Depreciation of my_asset (Cr Balance) = 1675.5

Depreciation Expense of my_asset (Dr Balance) = 0

Step 6: At the end of financial year 2013 (end of 3rd year of life) calculate depreciation expense i.e. 5% of Book value (15342.5).

Depreciation Expense of my_asset= 5% of 15342.5 = 767.13

Accounting Entries:

Depreciation Expense of my_asset (Dr) 767.13

Accumulated Depreciation of my_asset (Cr) 767.13

Balances:

Cost of my_asset (Dr Balance) = 17000

Accumulated Depreciation of my_asset (Cr Balance) = 2424.63

Depreciation Expense of my_asset (Dr Balance) = 767.13

Book Value of my asset=Cost of my_asset(17000)-Accumulated Depreciation of my_asset(2424.63)

Book Value of my asset=> 14575.38

Step 7: Transfer balance of ‘depreciation expense of my_asset’ to ‘profit and loss acc’ at 31/12/2013.

Accounting Entries:

profit and loss acc (Dr) 767.13

Depreciation Expense of my_asset (Cr) 767.13

Balances:

Cost of my_asset (Dr Balance) = 17000

Accumulated Depreciation of my_asset (Cr Balance) = 2424.63

Depreciation Expense of my_asset (Dr Balance) = 0

Step 8: At the end of financial year 2014 (end of 4th year of life) calculate depreciation expense i.e. 5% of Book value (14575.38).

Depreciation Expense of my_asset= 5% of 14575.38 = 728.77

Accounting Entries:

Depreciation Expense of my_asset (Dr) 728.77

Accumulated Depreciation of my_asset (Cr) 728.77

Balances:

Cost of my_asset (Dr Balance) = 17000

Accumulated Depreciation of my_asset (Cr Balance) = 3153.39

Depreciation Expense of my_asset (Dr Balance) = 728.77

Book Value of my asset=Cost of my_asset(17000)-Accumulated Depreciation of my_asset(3153.39)

Book Value of my asset=> 13846.61

Step 9: Transfer balance of ‘depreciation expense of my_asset’ to ‘profit and loss acc’ at 31/12/2014.

Accounting Entries:

profit and loss acc (Dr) 728.77

Depreciation Expense of my_asset (Cr) 728.77

Balances:

Cost of my_asset (Dr Balance) = 17000

Accumulated Depreciation of my_asset (Cr Balance) = 3153.39

Depreciation Expense of my_asset (Dr Balance) = 0

Step 10: At the end of financial year 2015 (end of 5th year of life) calculate depreciation expense i.e. 5% of Book value (13846.61).

Depreciation Expense of my_asset= 5% of 13846.61 = 692.33

Accounting Entries:

Depreciation Expense of my_asset (Dr) 692.33

Accumulated Depreciation of my_asset (Cr) 692.33

Balances:

Cost of my_asset (Dr Balance) = 17000

Accumulated Depreciation of my_asset (Cr Balance) = 3845.72

Depreciation Expense of my_asset (Dr Balance) = 692.33

Book Value of my asset=Cost of my_asset(17000)-Accumulated Depreciation of my_asset(3845.72)

Book Value of my asset=> 13154.28

Step 11: Transfer balance of ‘depreciation expense of my_asset’ to ‘profit and loss acc’ at 31/12/2015.

Accounting Entries:

profit and loss acc (Dr) 692.33

Depreciation Expense of my_asset (Cr) 692.33

Balances:

Cost of my_asset (Dr Balance) = 17000

Accumulated Depreciation of my_asset (Cr Balance) = 3845.72

Depreciation Expense of my_asset (Dr Balance) = 0

Below is the calculation of depreciation as per year.

No Date Period Book Value Ratio Depr Exp Acc Depr WDV
1 31/12/2011 ‘Oct-2011’ 17000 0.05 850 850 16150
2 31/12/2012 ‘Oct-2011’ 16150 0.05 807.5 1657.5 15342.5
3 31/12/2013 ‘Oct-2011’ 15342.5 0.05 767.13 2424.63 14575.38
4 31/12/2014 ‘Oct-2011’ 14575.38 0.05 728.77 3153.39 13846.61
5 31/12/2015 ‘Oct-2011’ 13846.61 0.05 692.33 3845.72 13154.28

WDV Balance = 13154.28 (Last WDV)

Note: when we sell out my_asset either we will get profit or loss.

  1. November 8, 2012 at 8:37 am

    Hello, Your analysis is mind blowing. Your post is very useful to me. And what , i say thanks.

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