Assets accounting
Assets account.
The assets accounting component consists of the following parts:
1. Traditional accounting
2. Processing leased assets
3. Preparation of consolidation
4. Information system
Fixed assets structure
Balance sheet level
Classification level
Asset related level-----------Group assets, Main assets, Asset sub master, Line items.
Group assets + Main asset = Asset class.
Assets types
Ø Tangible assets
Ø Intangible assets
Ø Financial Assets
Every asset transaction is linked to a transaction type.
1. Type of Asset Acquisition
Goods receipt – an asset is received via the logistical process when acquired from a
supplier.
Direct invoice – an asset is purchased via direct invoice, for example, on credit card
from a supplier.
Settlement of a construction in progress – when the costs that are involved in a project,
consisting of multiple items, is completed.
2. Transfer
To an affiliate fund – transfer to another fund within the organization
Due to reclassification – an asset is reclassified
3. Retirement
With revenue or without revenue
When a request to dispose of an asset is received, assets that are in usable condition
must be screened to determine if they can be used by another area. If the asset cannot be
used by another area, the asset will be retired/disposed as follows:
• Trade-ins
• Sale
• Donations
• Scrap
• Lost/stolen
Once an item has been retired, the information about the retirement will be captured,
including the type, date and related proceeds or trade-in value if applicable.
Both groups of assets or portions of single assets may need to be disposed. The system
has the capability of performing partial and mass disposition of assets. Disposed assets
can be returned to service.
Financial and Controlling
Asset Life Cycle
The life cycle of an asset consists of 5 phases:
1. Create the Asset Master Record
2. Acquire the Asset
3. Change / transfer asset
4. Depreciation
5. Retire
Asset Procurement Summary
The overall asset procurement process is comprised of the following steps:
1. The request for an asset purchase. This is usually in the form of a purchase requisition
created manually.---MM
2. The source of supply is determined for the needed item by either the purchasing
department or the system.---MM
3. The requisition is assigned to a vendor.---MM
4. A purchase order is created with reference to the requisition. An asset master record can
be created at the time the purchase order is created in SAP or prior to the purchase order.---MM
5. The system provides automated expediting and follow-up reminders to ensure prompt
delivery of the order.---MM
6. The asset is received into the warehouse via purchase order goods receipt. The asset is
valued at the time of goods receipt. The asset's quantity is updated at time of goods
receipt.—MM/WM
7. The invoice is validated by comparing it to the original purchase order price and to the
quantity received. The asset value will be adjusted for any price difference at the time of
invoice.---FI/MM-GR/IR> PRICE DIFF BETWEEN GR AND INV.
8. Vendor payment will be made based on payment terms and conditions defined in
accounts payable.---FI
9. The Asset will depreciate monthly.—FI-AA
Assets include:
• Buildings
• machinery
• Vehicles
• FF&E
In SAP, assets will fall into different asset classes. Each asset class has been assigned to a
specific general ledger account. The tables below and on the next page outline specific
details about each asset class.
| Account determintion | Asset class | GL account | Depreciation EXP | Useful life | Cost center |
| 10000 | land | 200000 | 400000 | 10 | Primary |
| 20000 | building | 300000 | 400001 | 10 | Primary |
| 30000 | vehicle | 400000 | 400002 | 10 | primary |
| 40000 | Plant & machinery | 500000 | 400003 | 10 | primary |
| 50000 | Furniture | 600000 | 400004 | 10 | Primary |
| 60000 | Capital work in progress | 700000 | 400005 | 10 | Primary |
| | | | | | |
Cost centers must always be G&A for asset classes 171000 – 179000, APF, and OTHER.
All of these asset classes must have cost centers that map to RAMCAS department 00
though some may be posted to the actual activity as long as the department is 00. See the
chart below for which activity a cost center must be posted to.
Accumulated depreciation on building
Accumulated depreciation on plant
Accumulated depreciation on furniture
Accumulated depreciation on vehicles
Loss on sale of assets
Profit on sale of assets
Loss on sale of scrap
Sale of assets
Account determination
One of the most important functions of the Assets class is to establish the connection between the assets master record and the corresponding accounts in the general ledger in financial accounting. The connection is created by the account determination key in asset class.
Functions of Asset Accounting include:
1. Acquisition
2. Transfers
3. Depreciation
4. Settling of construction in progress
5. Retirements, disposals and trade ins
Acquisitions occur when a fund acquires a new asset.
Asset transfers are required whenever an asset is moved.
This can occur when:
• An asset is moved between funds or bases.
• Assets used during the duration of a project or contract may have to be transferred to
single or multiple locations upon completion of the task. This is referred to as Assets under
Construction (Construction in Progress).
Depreciation
Depreciation is the reduction of the book value of an assets due to its usage over time or due to legal framework for taxation reporting. The depreciation is usually calculated taking into consideration the economic life of assets. Expected value of the assets at the end of the time.
Depreciation either can be planned and unplanned.
Planned depreciation in one which brings down the value of the assets after every planned period. Say every month ,till the ssets value is fully depreciated over its life period. By the this you will know what will be the value of the asset at any period of time in its active life.
Unplanned depreciation is a sudden happening of an event or occurrence not foreseen resulting in a permanent reduction of the value of the assets.
ASSETS CLASS;
Assets class is the basis for classifying an assets based on business and legal requirements.It is essentially a grouping of assets having certain common characteristics. Each assets in the system needs to be associated with an assets class.
When a current asset depreciates in value the value of the asset is re-established
Assets class is the link between the assets master record and the relevant accounts in the gl and account determination in the assets class enables you to post the relevant gl account.
Retirement of an asset
When a current asset reaches the end of its useful life or expires in a different way, it can
be retired by:
• Sale of the asset
• Scrapping of the asset
• An old asset is traded in for a new one
Depreciation Policies
Book depreciation
Cost depreciation
Tax depreciation
Depreciation method
WDV METHOD
STRAIGHT LINE METHOD
SUM OF YEARS DIGITAL METHOD
CHART OF DEPRECIATION
The chart of depreciation contains a list of Country specific depreciation areas. It provides the rules for the evaluation of assets that are valid in a given country or economic area. Sap comes supplied with default chart of depreciation that are based on the requirements of each country.
These default chart of depreciation also serve as the reference charts from which you can create a new chart of depreciation by copying one of the relevant charts of depreciation.
ü You are required to assign the chart of depreciation to company code.
ü The one COD can be assigned to multiple company codes.
The prime difference between chart of depreciation and chart of accounts are :
A. Chart of depreciation is a collection of Country specific depreciation areas.
B. The chart of accounts is a list of GL accounts used in company code. The Chart of accounts contain
1. Chart of accounts area
2. Company code area
There are three types of chart of accounts
1. Operating chart of accounts
2. Group chart of accounts
3. Country specific chart of accounts
1.Chart of depreciation is only country specific
The first step of Assets accounting Management
Step -1 Define company codes
Step-2 Assign company code to chart of accounts
Step-3 Define chart of depreciation
Step- 4 Assign nontaxable tax code to company code
Step-5 Assign chart of depreciation to company code
No comments:
Post a Comment