Comprehensive Assets Guide

Managing assets and related operations is crucial to ensuring accurate accounting reports and financial statements. It also helps in managing expenses spent on purchasing and depreciating assets in various ways, considering changes that might require re-evaluation or sale of the asset, as well as tracking different asset statuses.

Adding a New Asset

Through the assets menu, you can view the registered fixed assets and know the status of each asset, such as being in service or depreciated, and modify or delete these assets as needed.

To add a new asset, click on “Assets” under “Accounting” in the main menu, then click the “Add Asset” button.

Enter the required information

Add Asset Details:

Name: The asset name as it appears in the chart of accounts and financial reports.
Code: A unique identifier automatically generated by the system for each asset. You can edit it and customize its sequence as needed.
In Service Date: Specify the date when the asset starts being used.
Category Account: Choose from a list of main accounts that represent the nature of the asset.
Physical Location : Enter the address or location of the asset. This is mainly used for non-movable assets such as land and real estate.
Useful Life: The useful life of the asset depends on the depreciation period defined in the depreciation method settings.
In Service Date: Specify the date when the asset starts being used, which is also the date from which depreciation begins.
Serial Number: Enter the asset’s serial number if available.
Barcode: You can generate a barcode for easier asset tracking.

Example: If the depreciation period unit is “month,” then the useful life of the asset will be calculated in months.

If the asset is to be depreciated over 5 years, enter “60” in the useful life field, representing the number of months for the depreciation period.

You can modify these asset accounts or add a new main account to include the asset under it. For more information, refer to the chart of accounts guide.

Quantity: Specify the quantity of the asset purchased.
Define Individual Unit Details: When enabled, the Custody Details section will appear to allow entering data for each unit separately. Follow these steps:
Serial Number: Enter the serial number for each unit or click Generate All to auto-generate them.
Barcode: Enter the barcode for each unit or click Generate to auto-generate barcodes.
Custody Type: Select the custody type from the dropdown list (e.g., Employee, Department, or Location).
Assign To: Specify the responsible person or entity after selecting the custody type.
Physical Location: Select the actual location where the asset is stored or being used.

Add Pricing Details:

Purchase Price: The value of the asset at the time of purchase and the currency of the amount.

The purchase value of the asset is considered its current value for calculating depreciation starting from the date of asset addition. However, you can adjust the current value of the asset when adding depreciation if the amount differs from the purchase amount.

Cash Account: Specify the account representing the creditor from whom the asset was purchased.

Purchase Date: Specify the asset purchase date.

First and Second Tax: Add the applicable taxes on the asset to calculate their values automatically.

Depreciation of Assets and Their Types

Generally, an asset’s productive capacity decreases over its useful life until it is completely worn out. This necessitates distributing the cost of using the asset over its life as periodic expenses, making it easier to set aside the required amount for asset replacement after the end of its depreciation. This is the function of depreciation.

Depreciation of assets is accounted for in three methods, which you can apply on the system.

Depreciation Methods

Straight-Line Depreciation

In straight-line depreciation, the value of the asset is distributed as a fixed amount evenly over the productive period.

Depreciation data using the straight-line method:

Salvage Value: Enter the estimated residual value of the asset at the end of its useful life.

Auto Depreciation Frequency *: Specify how often depreciation will be calculated automatically (e.g., every 1 month).

Depreciation Amount / 1 Month(s) *: Displays the depreciation amount calculated for each selected period.

Start Depreciation Auto Date *: Select the date from which automatic depreciation will begin.

First Depreciation Amount: Displays the value of the first depreciation entry based on the selected start date.

Depreciation End Date: Select the date when depreciation will stop.

Accumulated Depreciation Account: Choose the account where accumulated depreciation will be recorded.

Depreciation Expense Account: Select the account used to record depreciation expenses.

Declining Balance Depreciation (Percentage)

In declining balance depreciation, the depreciation amount is higher at the beginning of the asset’s useful life and gradually decreases over time as the productive efficiency decreases. The decreasing amount is adjusted by calculating a percentage rate.

Depreciation data using the declining balance method:

Salvage Value: Enter the estimated residual value of the asset at the end of its useful life.

Auto Depreciation Frequency: Specify how often depreciation will be calculated automatically (e.g., every 1 month).

Depreciation Percentage / 1 Month(s): Enter the depreciation rate (%) to be applied for each selected period.

Start Depreciation Auto Date: Select the date from which automatic depreciation will begin.

First Depreciation Amount: Displays the value of the first depreciation entry based on the selected date and percentage.

Depreciation End Date: Select the date when depreciation will stop.

Accumulated Depreciation Account: Choose the account where accumulated depreciation will be recorded.

Depreciation Expense Account: Select the account used to record depreciation expenses.

Although the depreciation rate remains constant over time periods, the depreciation amount decreases. This is because the rate is applied to the asset’s value after subtracting the previous depreciations, meaning that the constant rate does not lead to a constant depreciation amount.

Example:

Suppose a company purchases an asset for 5000 SAR and calculates depreciation monthly at a rate of 20%. The depreciation amounts would be as follows:

First Month: 5000 / 20% equals 1000 SAR
Second Month: The asset value after subtracting the first depreciation becomes 4000 SAR.

Dividing this amount by 20% results in the second depreciation of 800 SAR, a decrease of 200 SAR from the previous depreciation.

Units of Production

In this method, the depreciation value is calculated based on the asset’s usage rate. As the asset’s productivity and usage increase, the depreciation amount for the corresponding period also increases.

Depreciation data using the units of production method:

Salvage Value: Enter the estimated residual value of the asset at the end of its useful life.

Cost Per Unit: Enter the depreciation cost assigned to each unit of production or usage.

Unit Name: Specify the unit of measurement (e.g., hours, items, kilometers).

Asset Total Units: Enter the total expected production or usage units over the asset’s lifetime.

Depreciation End Date: Select the date when depreciation will end.

Accumulated Depreciation Account: Choose the account where accumulated depreciation will be recorded.

Depreciation Expense Account: Select the account used to record depreciation expenses.

For more details on multiple measurement units on the system and how to convert between them, refer to this guide.

The units of production depreciation system is not applied to the asset automatically. Calculating the depreciation value and adding it manually within the asset file is required. For more details, refer to the “Manual Depreciation for Assets” guide.

For all types of depreciation, you can define these accounts yourself:

Asset Depreciation Account.
Asset Accumulated Depreciation Account.

Depreciation, Sale, and Revaluation of Assets

Asset Depreciation: Fully depreciating the asset and converting its current value to zero.

Click on “Assets” under “Accounting” in the main menu, then select the asset you want to fully depreciate (write-off), and click on the “Write-off” button.

Before write-off, note that the current value of the asset is 2000 and its status is “In Service“.

After writing off the asset, its status changes to “Depreciated” and its current value becomes zero.

You can sell the asset and document the sales transaction for accounting purposes, whether it results in a loss or profit.

Click on “Assets” from the dropdown menu under “Accounting” in the main menu. Then, select the asset you want to sell and click on the “Sell” button.

Enter the required information for selling the asset:

Sales Price: Enter the selling price of the asset.
Date: Select the date of the sale transaction.
Tax: Enter any applicable taxes on the asset from the available taxes in your account.
Cash Account: Select the debit party to whom you sold the asset.

Then, click on the “Sell” button.

After Selling the asset the message “Asset Sold Successfully” will appear and its status will change to “Sold” and its current value will become zero.