Top 5 things you need to know about Fixed Assets and Depreciation
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Okay, so, my name is Karen, and I’ll be facilitating the demo today. I’m an account manager here at TVision. I’ve worked here for about two years. My background is 18 years of software account management experience working for ERP companies.
Ian will be doing the demo today. He’s a support consultant here at TVision, and he’s been working here for about three years and using NAV since 2000.
There are two methods that you can use for managing fixed assets and depreciation in NAV or Business Central. These are through journals or through sales and purchasing. If you have experienced finance users who use journals regularly than this might be the preferred method. It’s also good if you would prefer not to record fixed assets on the GL. However, it is a more manual method.
If you currently use NAV or Business Central booking to purchase orders and invoices or sales orders invoices, then it’s very quick to start using that method for fixed assets as well, and the benefit of this method is that the standard processes will follow and the system will automatically calculate and gains and losses and approvals as well.
It’s also close to the GL so you can see the true value of the fixed assets and the impact on the company. Hopefully after this webinar will be able to decide which method is going to be best for your company.
Okay, so the top five things that we’re going to show you about fixed assets and depreciation today are: personal take on disposal. So this is the first stage of sucking up the asset you’ve recently acquired or the process of selling an existing asset. Next is how to set up the method of depreciation. So it’s be straight line, or diminishing value there about five standard ones available in the system.
Then we’ll show you how to revalue the asset, as some may increase over the years – for example property. And some assets can also be split up into the individual assets and have their own value depreciation. So for example, a truck could be split into a voice of Hobart and then vehicle then we’ll do the other way around you can enhance an asset by adding to it and creating a bigger one. So for example adding a new machine to a production line.
Okay, before the poll we would like to gauge your usage of fixed assets and depreciation in NAV or Business Central. So what I’m going to do, I’m going to launch the poll if you would mind submitting your answer that’ll be brilliant.
Okay just going to wait for people to start submitting. Okay responses are coming in. That’s great. So we’ll just give people a little bit more time to have a look at what the answers are and which one they’re going to choose.
Okay, just give a couple more seconds.
Okay, so that’s interesting. So the top one it says that we use fixed Assets in NAV and BC – it’s fully integrated with the GL, that’s around 70% and then 30% of saying that we record them in Excel or external system.
Okay, so I’m going to hand over to Ian for the demo.
Hi everyone, for today’s demo. I’m using a very recent Business Central. It’s 13, so I’m using the Windows Client as if I was on premise, so it looks very familiar to anybody who’s using a later version of NAV as well. Remember if you’re using Business Central SaaS or using the web client, the screen will look different to mine, but you’ll have basically the same information, it’s just laid out differently. The menus have gone to the top, the ribbon has disappeared, but everything is still there.
It’s just where it is on screen that’s changed. So first things first I’ve logged in and I’ve logged in as an accounting manager just to make life easy for myself. If I want to start working on fixed assets.
If I want to use the menus, I can go to Department’s, financial management, fixed assets and here’s pretty much all the tasks that I might want to use. If I don’t have the menus I could always just go up to the top and search for ‘fixed assets’ and it will pretty much bring me to this exact same suite of menus. Right, so first things first, you have your fixed assets. This company, we’ve got a few cars a bit of equipment, a lift and switchboard and please ignore those two go’s from me practicing yesterday.
And we want to buy a new fixed asset. Let’s do it from scratch. We’re going to buy a new company car. I want to use a Ford Focus again. We’ll use a Ford Mondeo, for example. So starting from scratch. I’m going to go to new I’m going to create my new fixed asset. It’s going to be a Ford Mondeo, I give it a class. It’s a tangible asset. I give it a sub class.
Here we go. It’s a car.
I can give it a location if it’s going to be in a certain part of my factory. I can get a serial number, the registration number of the car for example. I can assign it to a responsible employee or fantastic, and then the important bit down here, once we’ve taken on this asset which depreciation are we going to use? I’ve only set up one, but you can set up multiple depreciation books in your company if you want to. What’s the posting group going to be – I’ve selected car by default.
And what’s the depreciation method, as Karen said, there are half a dozen to choose from – straight line and the diminishing balances are quite common. Very rare people use manual. When is my asset going to be taken on? And let’s take this asset on, on the first of December 2019. And we’re going to depreciate it over three years, and pretty much that’s all I have to do for my initial setup.
So I say okay. Now my choice comes I want to physically take on that asset and give it a value. I’ve got two choices. I could go to a fixed asset journal and I can create a journal from scratch putting in all the accounts that I wanted to hit me all the values – if that is the way you want to go, you’re probably a very strong finance user, so I’m not going to bore you with details of how that works.
But if you’re one of those companies that may be using spreadsheets to record your fixed assets. You’re not quite sure about doing the fixed asset journals. There’s a nice easy way of doing it. If you use purchase orders, you can actually use a purchase order to take on your fixed asset. So let’s go and do that.
We’ll go and buy this fixed asset. So I’ll create a new purchase order and it is popping up in my other screen, who am I buying it from? Let’s buy it from the London postmaster.
(…) Document number, and instead of buying an item or buying against the GL account you choose to buy a fixed asset. Which fixed asset do we want buy? We want to buy this Ford Mondeo that we just set up. How many of them do you want to buy? Just the one, and it’s going to cost us, I don’t know, let’s say £6000.
And that’s it. Now, we’re using our standard already existing purchase orders. We’re using our existing processes. So if I’m at a company where approvals are required for purchasing I can still use my approval process and get this approved Etc. I haven’t set of approvals here. I’m just going to post this and I’m going to say that we’ve received the vehicle.
And now if I come back and I go look at my fixed assets again.
We will see that Ford Mondeo.
It now has a book value of £6,000. It’s been taken on by the system the system created those journals in the background for you, so that you didn’t have to figure out what goes where. As we’re going through, I’m going to click on this so we can see a history. What typically happens as the months go by each month we posted depreciation for this vehicle. Let’s assume we’ve been naughty and we haven’t been posting the depreciation. It’s now a year later and somebody picks up, oh we forgot to do the depreciation.
So let’s go over a year’s worth of depreciation. So from this menu I can search for a periodic activity called calculate depreciation. You can also search for it up in the search box.
So this is a nice little job. It’s just going to ask us a few questions which depreciation book, as I said, you can split up into multiple depreciation books. What’s the date we’re going to process this depreciation? Let’s make it the 30th of November 2020 – we’ve gone for a year, which is November 2020, we’ll give it a new document number.
And we will pretty much, if we leave this field blank, it’s going to post for all of my fixed Assets in the company depreciation book. Or we can choose just to post it for the one fixed asset. I’m just going to do this one to save time.
I say, okay.
It hasn’t created ones for me. I’m not going to try and debug why it didn’t create a journal lines for me. But basically what I would do after that step, I’ll probably put in a bad date.
On the GL Journal it would have created the lines for me here. And I know what I did wrong when I created my purchase order, it was probably dated in 2021 or something. That’s why I can’t find any depreciation for 2020. It would have created a journal and I would have been able to post depreciation. So what I’m going to do now is figure out what was wrong.
I’m just going to put a date, I’ll actually use the 31st of December 2022. I’ll say Okay and it creates a journal for me.
And it’s created the journal, and because it was such a long time in the future. It’s figured out it’s beyond those three years. So it’s done the full six thousand pounds worth of depreciation. It’s now up to me to post this journal. So it hasn’t changed anything for me. I still have to physically post this journal. If I disagree with these numbers, I can change them. So I’m going to pretend that I just have one year’s worth of depreciation, which is £2,000.
And I’ll give you 2,000 pounds down here as well.
And I will post office.
Both General lines, yes. It’s posted, we can come back, we can look at that fixed asset when I look at him.
We will see his book value has gone down to £4,000. If we click on that number the initial take home of £6,000 depreciation of £2000.
On any of these transactions, we can always navigate and we can see exactly where the postings gone in our GLR to keep track and make sure that everything is hunky-dory.
Now, let’s assume that we’ve come to the end of the life of this vehicle. We’re going to sell him, remember he’s worth £4,000.
Let’s instead of creating another Journal which we could have done in the first place. Let’s use our existing functionality and let’s use a sales order to dispose of this a bit better.
So we’ll created a new sales order, for some reason everything is opening on my other screen.
And we’ll sell it to Salian Gorian.
I’m happy with all this – what are we selling them? We are selling them a fixed asset. Which fixed asset always selling to them?
We’re selling the Ford Mondeo
That’s the one, and we’re going to sell it to them for £3,000. So remember its Book value is £4,000 but we’re selling it to him for £3,000.
And once again, we’re using our standard functionality, if I have to send it off for approval. I can still do that here. I’m just going to post this one, so we can see what happens to our fixed asset.
Okay, because I’ve disposed it, I need to change ourselves to a date well into the future.
Post… I don’t want to open an invoice… let’s go back and hopefully, I close my entire session, let me just reopen it.
I do tend to do that sometimes. I hit the cross on the top instead of hitting okay, and I closedown my entire system.
So, go back in.
Go to financial management, look for my fixed assets, fixed assets.
And when we have a look at this Ford, you can see it now has a book value of zero.
So that was the initial take on of 6,000, we get some depreciation for 2,000. We then sold the vehicle for 3,000 which left us that 1,000 different which has automatically gone to my gains and losses count, and the asset depreciation have been taken off the books.
So that’s basically the life cycle for a very simple asset using a purchase order to take it on using the calculator depreciation tool to do the depreciation for me. It just creates a journal for me to post and then using a sales order to sell that asset and it figures out the gains and loss and it disposes of the asset from my purchase ledger.
So nice and simple you could have done that through journals, but that’s hard work. If you do want to go that way, you probably know what you’re doing, so I’m not going to preach to you. Now, one of the interesting things when I was posting, was posting to the general ledger. You don’t have to post your fixed assets to the general ledger.
So if I come down to my depreciation books.
I’ve got my company depreciation book.
When I set this up.
I set it up and I put in all the ticks to integrate my fixed assets into the general ledger. So every time I post something into fixed asset it is affecting my general ledger balances. If you turn off these ticks and it’s as if you’re keeping your fixed assets as a separate register that is not impacting your general ledger.
So this is similar to recording your assets on a separate spreadsheet. So although it’s on NAV or Business Central. It’s not impacting my GL, I can keep track of my assets and I would have to do a manual journal in my GL each month or each year to say these are the value of my assets.
That’s a choice you can make. To me it’s easier if you turn on the integration, it just means that you can use all the existing tools and leaves less manual work for yourself.
Two other things that Karen mentioned was changing the value of fixed assets. So you might have a fixed asset such as some land and property which has gone up in value and you want to reflect this in your books. That is quite easy.
You simply need to do a periodic activity called a reclassification – no. A fixed asset GL Journal.
And within a fixed asset GL Journal, you give it your posting date, leave the document type blank. You say it is for a fixed asset, which fixed you are revaluing. Let’s revalue our switchboard, and here you’ve got a lot of options. So if my switchboard has gone down in value or it’s gone up in value.
Let’s assume it’s going down in value by an extra £500, above and beyond depreciation. I say it’s a write down, I say how much it’s gone down by £500.
And then if I’ve done my setup correctly, I insert a balancing account and it knows which GL account to post these write downs and revaluations to – and it’s a simple matter of then posting this journal. If the value had gone up, I would have put a depreciation in here instead of a write down.
And it’s going to check if I put a positive 500, it would have told me, nope, you have to put in a negative number, but it is obviously happy with what I did.
And once again if we go back and we have a look at that switchboard fixed asset.
We will see its value from its initial take on all the various depreciations. I’ve written down its value by £500. So this is a manually revaluing an asset – can either be a write down or a depreciation.
The final thing that I wanted to speak to you about was, splitting assets or combining assets.
So Karen gave a very nice example, you have perhaps bought a truck, and on that truck is a winch, you’re accusing the winch, but you want to sell the winch, but it’s part of your fixed asset. How do you do that? You have pretty much come in, you would create a new fixed asset for the winch. You’ve given a name and then once you’ve got that fixed asset created.
You would do the entries that you need through in reclassification journal.
So with classification journals, you always need a date. You need to get them document number.
And you say which fixed asset are you affecting, and you choose your vehicle,
You’d say it’s going to the new fixed asset, the winch fixed asset, and you can then say what percentage of that vehicles value do you want to move to the new fixed asset? Or you can say what values, if you know how much the winch is worth exactly – £500, you could say £500.
You reclassify, it creates a journal for you for you to post which will take the value of your truck down by £500 and take on your new winch asset with a value of £500. You could then sell that winch, dispose of it, or you can depreciate it at a different rate than your depreciating vehicle etc.
And you can use this reclassification journal to take one asset and split it into two assets. You can also use it to take two assets and split them into one new assets. So for instance, you bought a machine and you bought a conveyor belt, you want to weld them together and turn it into one big super machine. You could use a reclassification journal saying which two sub assets are going to become s new big asset.
Quick reclassify. It will create a journal for you to move those around to create your new super fixed asset.
As Karen was saying, there’s some choices that you need to make, if you’ve never use fixed assets on your system before you might want a little bit of help during the initial setup. There is quite a bit of setup that needs sorting out. A lot of it is self-explanatory. If you do need help these give us a call if you’re happy and healthy. And also, then deciding do you want to integrate with the GL or do you want to keep your fixed assets separate from the GL?
Remember that’s just turning on or off those ticks. But once you made your choice, you don’t want to be messing about with those ticks. So think carefully before hand.
And then finally, do you want to use your major fixed assets using the journals? You’re a big nice strong financial company, actually do if you are smaller company, or you don’t want to spend time on those things. Maybe you want to use your existing purchase order and sales order and you can use your existing processes your existing people. You don’t really have to understand the intricacies of taking on and disposing of assets – let the system sort that out for you.
That’s pretty much all I have for you guys. So are there any questions before I go? If you have any questions about what you’ve seen or something that we haven’t shown yet, you could just put them into the question box. We’ll give you a bit of time for that – I’ll just see if anything has come in. So one of the questions is we don’t need purchase orders, can we still use this fixed assets? Yeah, certainly as I said, you can choose whether to use journals for your fixed assets.
Or whether you want to use the sales orders and purchase orders, so the choice is yours there and just because you’re not using purchase orders to buy items and things like that. You have that functionality within your NAV and your Business Central system.
So you can use a purchase orders just to take on your fixed assets if you wanted to, so you’ve got the choice there you can work either way. Is there a set approval process you can use for fixed assets? Well, obviously if you use the purchase orders and sales orders, then you are using the approval process that you’ve already set up within your company. So everybody’s got their approval limits and everybody has their approval manager.
You can use that to manage taking on and disposing of your fixed assets, and with Business Central every Journal you can turn on an approval process if you wish to, so you know, even somebody who’s posting the monthly depreciation, you can have the bottom of the top of the screen that says request approval before they’re allowed to process, certainly. Fantastic, right we’re going to go back to the presentation.
So I’d like to leave you with the five key takeaways about fixed assets and depreciation that will assist you.
So fixed assets are easy to manage in NAV and Business Central, lot of people think it’s difficult, but hopefully we’ve shown you how simple it is and also the benefits of doing it in the software as opposed to separately on spreadsheet. Before you start using it, as Ian was saying, think the level of your current users how in currently manage product or services in the system because both of these factors will help you decide which method is best for your company. There is a built-in job in NAV Business Central to run once a month to calculate depreciation. Once you’ve set up a fixed asset and depreciation method, the system will calculate the depreciation for you and will create a journal for you to post. You can put Dimensions against fixed assets. You can track which cost centre via department or region, for example that has the asset and this will help to enhance your reporting and analysis.
TVision is here to help you. So as Ian was saying, if you’re not sure which method or you’re currently using a method for fixed assets and it’s not really working for you, please you know, just give us a call we can help you with the setup.
So we hope you found this webinar interesting and informative. As mentioned previously, this is the 20th in a series of webinars. We will be sending out the email soon for the next one, we will also put a reminder in the newsletter. But please do remember that on the website under ‘Learn’ halfway down if you click past webinars, all 20 are on there for you to view the recordings.
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