Making I.T. Happen
Accounting and Information Technology, Assistance and Support
Sage 50 Using the fixed Assets Register

The Fixed asset register is a useful tool. Not only does is calculate depreciation for you and manager the process it also stores lots of useful information about where things were bought from whom, how much they cost etc. Think of the worst disaster scenario, a fire in the office, everything is destroyed.

With a credit card and your backups you will be up and running in no time.  First day buy a PC, Ring Sage and arrange for a new CD and copies of your serial number and key code, Ring the insurers and get the claim form.  Second day, install Sage and restore data.  Get information from the fixed asset register to fill in the claim forms.

What is depreciation and why have it?

Depreciation is an adjustment to your accounts, it has no cash impact on the business, but it does matter.  When you buy assets such as a car the business gets to use them free of the capital expense, however they are normally worth a lot less when they need replacing so profit has to be made to pay for them to be replaced.  Rather than having this appear only when assets are replaced it is normal practice to make an allowance for the cost as you go along month by month.  You could think of it as putting money aside to pay for the replacement later on (although in practice it is the opposite, accounting for the decrease in the value of the equipment).

What rate should I use?

In real life there is no way that we can determine exactly how much an asset will be worth when we come to sell it.  So we have to make an estimate, in general we plan to make an estimate that errs on the side of caution.  So a telephone system could last for 10 years and have no resale value, a £1000 PC could last for 3 years and have a resale value of £50.  A specialist CNC Lathe could last for 30 years and even then have a scrap metal value that is significant. There are some limitations placed on these rates by the Inland Revenue, you may wish to discuss this with your business accountant and your tax accountant.  You should remember that your accounts are for you not for your tax advisor.  

For example if you purchase a PC for a specific job, where the environment is very hostile and the equipment is only need for a short period then it might be quite reasonable to estimate that it will have no value to you at the end of the year and write off the cost over the next twelve months.  It is right and proper to do that, however, your tax accountant may tell you that you can't do that.  What they really mean is that they could not economically convince the Inland Revenue that it is reasonable and should be written off.  This is not a problem, your accounts are for you, not for your tax accountant, they can make adjusting entries at your year end.

How do I set it up?

So by now we understand why we need to depreciate assets and what rate is appropriate.  So lets get on and set up some records and see how it works.  You might like to do this in the demonstration company and run a period end so you can see for yourself what it does before doing it on your live data.

• Start Sage and go to the demonstration company.
• Select the Modules menu (Alt-O) and select the Asset Register (A)
• With nothing selected click on the record button to create a Blank record.
  • Enter the Asset Reference :-Every asset must be given a unique code for easy identification. Use up to 8 text characters, e.g. TRUCK01. Note: No spaces are allowed in the reference.
  • There are several lines for the Description, Serial Number, Location/Employee.  These are the useful things to know if you need to fill in a claim form or Help Police in finding thieves and maybe your stuff!
  • Date Purchased, and Supplier are useful for insurance claims.
  • Finally you can group assets together using Asset Categories, you can set these up from the Settings Menu (Alt-I) Fixed Assets (X)
• Now select the Back Tab (Posting).  This is where you set up all the financial information.
  • Department is fairly straight forward.
  • The next option is the Balance Sheet nominal code, depreciation is the loss in value of an asset, we pay for it in the Profit and Loss account and we Loose the value in the Fixed Asset account on the Balance Sheet. This account is normally one starting with a 0 if you are using the standard Sage chart of accounts.
  • The next is the P&L account this is normally starting with an 8 if you are using the standard Sage chart of accounts.
  • There are two methods Straight Line and Reducing plus a Write off Function that enable you to write off the remaining value.  Straight line just means that every month the value gets less buy the same amount, with reducing balance it gets less by the same percentage, this effectively makes assets more expensive initially and less expensive later on.  If you are unsure talk to your accountant (Technically the Directors set policy but the accountants are normally the only ones who know)
  • The Rate of depreciation is the annual rate, so if you want to write an asset off over three years using straight line depreciation it looses a third (33.3%) of it's value each year.

Rates:

• No of Years	Rate per Year
  1	100%
  2	50%
  3	33.3%
  4	25%
  5	20%
  6	16.7%
  8	12.5%
  10	10%
  15	6.7%
  20	5%
  25	4%
  50	2%

  • The Cost Price is what the item cost when you purchased it.
  • The Book Value is the remaining value of the asset to the business. 
  • Sage will calculate and display the depreciation figures.
  • Press the Save Button

Well Done!  You have now set up your first fixed asset, assuming that you are in the demonstration data we can now run a month end so you can see what Sage will do for you each month.

Note that once run you can not re-run the month end again, this is a useful safety measure to make sure you don't depreciate things twice in one month.

Go to the Tools menu (Alt-T) Select Period End (N) and Month End (M)

A box tells you when it was last run, probably a long time ago if your using the demo data or don't normally use this feature.  Make sure there is a tick in the depreciation box. At the top it tells you the current month this is based on the system date, i guess for month end we are all logged in on the last day of the month anyway, but check you are on the right date.  If your happy with the date proceed on.  Nothing seems to happen normally, this is because it is done already.

To see what has happened got to financials and look at the last few transactions and you will see that a journal entry has been made for the months depreciation!