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Regular Member
 
Group: Forum Members
Last Login: 21/07/2008 11:57:17 PM
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| Hi, I am trying to amortise my fund's start-up costs on a straight line basis over 5 years, with no apportionment in the first year. I have added a new physical asset class, asset category and depreciation schedule.
I am working in the 2006/2007 financial year and it seems the only way I can avoid apportionment is to show the asset (formation costs) as having being acquired on 1/07/2006.
However since I cannot enter an acquisition date earlier than the fund establishment date (April 2007) I can't achieve a full years depreciation in Year 1. Am I missing something here? Regards pelagic
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MySF Administrator
Group: Administrators
Last Login: 4/11/2010 3:24:01 PM
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Hi,
You are going about this the right way. However, if you wish to avoid apportionment in the current year then please add the asset after you have done the year end rollover for the current financial year. You should also date the acquisition of the asset as the first day of the new financial year.
In short, there is no way to selectively avoid depreciation processing once the asset has been added for a particular date.
Regards,
MySF
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Regular Member
Group: Forum Members
Last Login: 21/07/2008 11:57:17 PM
Posts: 15,
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That would mean that I would not show any depreciation for the fund establishment year 2006/2007, which would be a problem.
Can I get around it by creating the appropriate GL accounts and journalising the depreciation?
My problem is that the 2006/2007 accounts are already prepared and include a full years start-up depreciation (as allowed in ITAA 1997 for certain types of expenditure, specifically including start-up costs).
If I can't get it right my roll over balances won't be correct.
I decided to enter the data for the 2006/2007 year as there was very little activity with a "late in the year" start-up. Maybe I should just enter opening balances for the 2007/2008 year instead. That would not be my preference but would it make life easier?
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MySF Administrator
Group: Administrators
Last Login: 4/11/2010 3:24:01 PM
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Hi,
You should start from the 07/08 financial year.
Please add the costs as a physical asset for the first date of the financial year, using the original total of the costs. When you create the depreciation schedule for the asset (click 'depreciation schedule' link on the additional information tab) please enter the opening adjustable value as the cost less the depreciation recorded for the first year.
Your opening balances will be:
asset account: total amount of setup costs
accumulated depreciation account for this asset: depreciation so far (up to start of this financial year)
Regards,
MySF
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Regular Member
Group: Forum Members
Last Login: 21/07/2008 11:57:17 PM
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The problem I see with this approach is that the Bank Account transactions will not be correct.
The various start up payments were made during the 06/07 year. If I add the asset from 01/07/07, how do I handle the payment side of things?
Is there no way I can get the 06/07 accounts to correctly reflect the transactions and record a full years depreciation?
Regards
pelagic
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MySF Administrator
Group: Administrators
Last Login: 4/11/2010 3:24:01 PM
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Hi,
You can edit the transaction created from recording an addition of the asset. In this case you will end up with a purchase transaction that looks something like:
DR asset
CR bank
.. plus entries for depreciation.
You should reverse this transaction through the Reporting > Transaction Reporter screen and then process a new one that substitutes one or more members' equity accounts for the bank line.
You can record all of last year's entries in sequence to make sure that you have all of the past data, but this is likely to be a longer process and may be of little benefit going forward.
Regards,
MySF
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Regular Member
Group: Forum Members
Last Login: 21/07/2008 11:57:17 PM
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Ok, I'm just a simple engineer, but I would really like to get this right!
My objective is to record the transactions as they happened (in the 06/07 year) and record a full years depreciation of start-up costs in that year.
So please consider this approach and let me know if it's OK.
The fund was established on 04/04/2007 with start-up costs of $990.
I created a new asset class, asset category and depreciation schedule.
GST is partially claimable so the system recorded the following transactions:
DR 1402 Start up costs $900
DR 2510 GST Paid $67.50
DR 1402 Start up costs $22.50
CR Bank A/C $990
Knowing that the software would calculate depreciation from 04/04/2007, I created the depreciation schedule showing the following:
Cost of asset $922.50
Opening adjustable value $781.98
Method: Prime cost over 5 years
Next I depreciated the asset to 30/06/07, which created the following transactions:
DR 5145 Depreciation $43.98
CR 1512 Acc Dep Start up costs $43.98
Finally I reversed that transaction and edited it as follows:
DR 5145 Depreciation $184.50
CR 1512 Acc Dep Start up costs $184.50
The P/L now correctly shows the full years depreciation of $184.50 as an expense.
The Balance Sheet shows the asset value as $922.50 with accumulated depreciation as $184.50
The depreciation schedule shows the correct written down value of $738
What do you think?
When I roll over at year end will my balances be correct?
Regards
pelagic
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MySF Administrator
Group: Administrators
Last Login: 4/11/2010 3:24:01 PM
Posts: 464,
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Hi,
This all looks good. I am not sure why there is a full year's worth of depreciation applied for something that was only 'owned' for a small fraction of the year, but if your accountant / auditor is happy with this than that is ok.
At the end of the current year you will need to process depreciation again for this year, which will be another $184.50 and this time that amount will be calculated automatically by the depreciation schedule.
Regards,
MySF
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