This chapter contains these topics:
You can use the disposal programs in the Fixed Assets system to record asset disposals. You can also record new asset costs for trade-in transactions.
From Fixed Assets (G12), choose Transfers, Splits and Disposals
From Transfers, Splits and Disposals (G1222), choose an option under Asset Disposals
When you dispose of an asset, you can indicate a specific method of disposal, such as scrapped, theft, or charity. The system updates the asset master record with the disposal date (unless you enter a date in the asset master record) and indicates the method of disposal in the Equipment Status field. The system also creates the journal entries for the disposal. You must post the disposal journal entries to the general ledger and fixed assets.
The disposal programs create journal entries for accounts based on the disposal account rules that you set up. These rules can be very simple or complex based on your company's needs. These rules replace information originally contained in the FDS series of automatic accounting instructions.
If you must dispose of more than one ledger, a second currency ledger for instance, you can indicate which ledgers to include. In addition, different account information can be specified to preserve the cost and accumulated depreciation accounts and use a reserve account in their place. Different account information can also be used to comply with charitable deduction reporting requirements in some countries.
If necessary, you can dispose of a single subledger for one or more assets.
Disposing of fixed assets consists of the following tasks:
Performing Single Asset Disposals
Performing Mass Asset Disposals
Verify that the following tasks are complete:
Disposal account rules are set up
Depreciation is recorded through the disposal date of the asset
Cash receipts from disposal proceeds are posted to fixed assets
Accounts payable vouchers for trade-ins are posted to fixed assets
You can use Single Asset Disposals to dispose of assets individually. Dispose of assets individually to record the gains and losses that result from a disposal, and to record the new asset cost if there is a trade-in. You can also use Single Asset Disposals to void or delete a disposal entry for a particular asset whether it was disposed of by the Mass Disposals or Single Asset Disposals procedures.
The system creates disposal journal entries based on the disposal type that you specify when you enter disposal information. You can use Single Asset Disposals to perform four types of disposals:
Performing single asset disposals consists of the following:
Entering disposal information
Reviewing and revising disposal entries
Posting the disposal entries
Figure 28-1 Single Asset Disposals screen
To add a new batch for the disposal journal entries, complete the following fields:
G/L Date
Subledger/Subledger Type
Disposed Asset Number
Disposal Method
Date Disposed or Retired
Type of Disposal
New Asset Number if Trade In
Note:
The batch number assigned by the system remains the same until you leave the asset disposal program. You can also include journal entries that relate to multiple asset disposals in a single batch.Figure 28-2 Single Asset Disposals (New Batch) screen
2. To accept the transactions, complete the field following this message:
Is this Information Correct? (Y/N)
If you are disposing of a single subledger, complete the field following this message:
Should the Date Disposed be Updated? (Y/N)
The system clears the screen and creates the disposal journal entries.
Field | Explanation |
---|---|
Disposal Method | A user defined code (12/ES) that identifies the equipment or disposal status of an asset, such as available, down, or disposed. |
Type of Disposal | The type of disposal determines what journal entries the system creates. There are four types of disposals. Valid codes are:
1 – Simple disposal, no trade in and no cash proceeds 2 – Disposal with cash proceeds 3 – Disposal with trade-in 4 – Disposal with trade-in & cash proceeds |
Caution:
If there are amounts in the Inception to Date column/Cost and Accumulated Depreciation fields on the Cost Summary screen, the asset disposal is not complete. After you successfully complete both steps of the asset disposal process, Post to G/L and Post G/L Entries to Assets, there will be no amounts in the Inception to Date column/Cost and Accumulated Depreciation fieldsTopic | Description |
---|---|
Using a subledger and subledger type | If you specify a subledger and subledger type in the disposal information, the asset disposal updates only the specified subledger. You can choose whether to update the disposal date or leave it blank. |
Trade-in and highlighted asset field | If the Item Number field is highlighting and the error message is 0025, Record Invalid, there is no Asset Master record set up for the new asset in the F1201 file. When you do a disposal with trade-in, you must create a master record of the new asset before you dispose of the original asset. |
Disposed asset and the compute depreciation journal | When an asset is disposed, it will appear on the Depreciation Journal for tax ledgers until the end of the current fiscal year. This is done to permit accurate tax reporting. Even if no depreciation is calculated, the asset will appear on the Depreciation Journal. The asset will not appear on the Depreciation Journal for the next fiscal year once you run the Fixed Asset Annual Close. |
To review and revise disposal entries
On Single Asset Disposals
To locate a single disposal journal entry, complete the following fields:
Document Number
G/L Date
To void disposal journal entries, complete the following field:
Void
You must manually post single disposal journal entries to the general ledger and fixed assets. To perform this task, run the following posts:
Disposal Post to G/L (P09800)
Post G/L Entries to Assets
Dispose of multiple assets instead of a single asset.
Use data selections to indicate the assets that you want to dispose of.
Post the disposal entries to the general ledger automatically. The Mass Asset Disposals program performs this post automatically unless you specify Batch Approval in your system's setup.
The system creates disposal journal entries based on the disposal type that you specify when you enter disposal information. You can use Mass Asset Disposals to perform two types of disposals:
You can use processing options to run a preliminary or final mass disposal. The preliminary disposal does not create disposal journal entries. Run a preliminary disposal for proofing purposes before you run the final disposal.
Performing mass disposals consists of the following tasks:
Entering mass disposal information
Posting journal entries for mass disposal
To enter mass disposal information
On Mass Disposals
Select a DREAM Writer version and complete the appropriate processing options on Processing Options Revisions.
Note:
Use Data Selections to indicate what accounts you want to affect by the disposal. Company and item number are mandatory data sequence items for the mass disposal procedure.To post journal entries for mass disposals
If your system requires batch approval, you must post the disposal journal entries manually to the general ledger before you run Post G/L Entries to Assets.
If your system does not require batch approval, it automatically performs the post to the general ledger. You must run only the Post G/L Entries to Assets to post journal entries for mass disposals to fixed assets.
Topic | Description |
---|---|
G/L selections | The processing option for the G/L post submittal works only under the following conditions:
|
A disposition is the permanent withdrawal of property from use in a trade or business or in the production of income. A withdrawal may be made by sale, exchange, involuntary conversion, retirement, abandonment, or destruction. A disposition of property before the end of its recovery period is referred to as an early disposition.
Compute Depreciation (P12850) does not require special setup because the early disposition rules have been accounted for in the P12850 program. Compute User Defined Depreciation (P12855) will require special setup to accommodate the desired depreciation results in the year of an early disposition.
Disposal year rules are designed to allow an asset to calculate depreciation to meet the requirements of a disposal year convention in the year an asset has been disposed. This type of disposal would take place during the asset's life and not in the year the asset is placed in service, or in the final year when an asset becomes fully depreciated. In the first and final years of an asset's life, the First Year Spread and Last Year Spread will override the disposal rules.
Use the Depreciation Rule Revisions program (P12851) and Depreciation Formula Revisions program (P12853) to establish a disposal year depreciation calculation setup as the 999 life-year rule. This 999 life-year rule needs to be set up and added to the applicable Depreciation Rule. These rules only apply to those depreciation methods using a compute direction of I or C. If you are using compute direction R or P, disposal year processing has already been accommodated; therefore, no 999 life-year rule is required.
The 999 life-year rule will only be observed by the Compute User Defined Depreciation program (P12855), and for those assets that have the date disposed field populated.
The following steps are to be followed in order to take the correct amount of depreciation prior to running Single Asset Disposal (P12105) or Mass Disposals (P12104).
From the Asset Master Information screen (P1201), manually enter the Date Disposed for the asset which is being disposed of early. Equipment Status may also be entered at this time but is not required.
Run Compute Depreciation (P12850) and/or Compute User Defined Depreciation (P12855) for each ledger that is applicable to the asset. Depreciation must be run through the end of the disposal fiscal year. Refer to the section above for special setup required for Compute User Defined Depreciation (P12855).
After verifying the correct amount of depreciation has been taken for each ledger, Single Asset Disposal (P12105) or Mass Disposals (P12104) can now be run to dispose of the asset's ledgers. The date disposed used in the Single Asset Disposal (P12105) or Mass Disposals (P12104) must be the same date that was entered in step 1.