The Non-Current Assets module displays entries for non-current assets that have been added with purchase invoices or manually, as well as non-current asset amortization.
When entering the initial balance, the non-current assets are recorded on the respective non-current asset account; however, the non-current asset entry is not made under registered non-current assets. In order to register a non-current asset, add a non-current asset manually by clicking on ‘Add manually a new non-current asset’. Fill in the name of the non-current asset, non-current asset account, and acquisition cost, date of recording the asset, depreciation rate in the window that opens and save the new non-current asset.
When entity acquires a non-current asset and records it through a purchase invoice, then the program automatically creates a non-current asset entry. In case of such non-current asset entry, the rate of depreciation must also be determined. In order to do so, click on ‘View’ on the non-current asset row, then click on ‘Change non-current asset details’, and fill in the rate of depreciation.
After adding a non-current asset, the non-current asset data window opens that has two tabs: Non-current Asset Details and Depreciation Entries for the Non-current Asset.
Non-current Asset Details tab displays information about the non-current asset, which can be changed; in addition, a non-current asset can be recorded and deleted if necessary. After recording a non-current asset, a button ‘Create depreciation entries’ appears on the Depreciation Entries tab; this can be used for creating depreciation entries for a past period. In the future, the program will create depreciation entries for each non-current assets independently at the end of each month.
Writing off non-current assets
Recorded non-current assets can be deleted from e-Financials after voiding depreciation entries. In order to write off non-current assets, open the respective non-current asset entry and click on ‘Write off non-current asset’.
If you are going to sell the asset after writing it off, a sales invoice must be prepared in the Sales Invoices module. Creating a sales invoice does not write a non-current asset off the balance (this function has not been developed yet). When writing off non-current assets, the date of write-off must be determined; then, an automatic entry will be created, which automatically transfers the remaining amount of depreciation to loss account 7105.
An example of writing off a non-current asset.
For example, a car is recorded on non-current asset account 1820 Machinery and equipment. The car was purchased for 2,000 euros. By the time of write-off, depreciation amounts to 1,500 euros.
If you click on ‘Write off non-current asset’ in the Non-current Assets module, then the portal makes an automatic entry:
D 1842 Accumulated depreciation of machinery and equipment 1,500
D 7105 Loss from write-off of fixed assets 500
C 1820 Machinery and equipment 2,000
When selling non-current assets with a sales invoice, a new product/service must be created; the profit account should be 3820 Profit from sale of asset, and the sales invoice should be confirmed.
Non-current assets can be sold for a profit, a loss or the precise amount left over from depreciation.
1. Selling for a profit
If the selling price of a non-current asset is greater than the remaining depreciation (for example, the car is sold for 1,700 euros (company is not VAT liable)), then the sales invoice creates the following entry in the system:
D 1210 Accounts receivables 1,700
C 3820 Profit from sale of assets 1,700
In order to reflect the profit on the profit row in the profit report (not profit and expenses rows both), you can make a summary entry for the sale of non-current asset; doing so, you will reduce the profit account by the amount on the expenses account (the actual revenue from selling the non-current asset will remain on the profit account):
D 3820 Profit from sale of assets 500
C 7105 Loss from write-off of fixed assets 500
Now, 1,200 will remain on the profit account, which is the actual result of the sale.
2. Selling with a loss
If the selling price of a non-current asset is lower than the remaining depreciation (for example, the car is sold for 300 euros (the company is not VAT liable)), then the sales invoice creates the following entry in the system:
D 1210 Accounts receivables 300
C 3820 Profit from sale of assets 300
In order to reflect the loss on the expenses row in the profit report (not on profit and expenses rows both), you can make the following entry:
D 3820 Profit from sale of assets 300
C 7105 Loss from write-off of fixed assets 300
Now, 200 euros will remain on the expenses account, which is the actual result of the sale.
3. If a non-current asset is sold for the exact amount that has been left over from depreciation (500 euros in this example), you can make the following entry:
D 3820 Profit from sale of assets 500
C 7105 Loss from write-off of fixed assets 500
In this case, the profit report does not reflect a profit or a loss from the sale of a non-current asset.
Summarizing entries are optional, you do not have to make those; these entries do not change the economic results, because without those entries, the sums are added to both the profit and expenses side in the profit report. If you decide to make those entries, the profit report will only display the profit or the loss, and therefore, the picture is a little clearer about the economic results of the company.