Fixed Assets · Setup & configuration · 7 min read

Set up asset categories and depreciation books

Define the depreciation terms and ledger accounts of an asset category, activate it with a second person, and add tax or management books.

Before you begin

• The chart of accounts is in place in Finance.
• You know the depreciation policy for the group of assets: method, life, residual and the accounts to use.
• Permissions: asset.manage prepares; asset.approve activates. The person who prepared the category cannot activate it.

Steps: category

1. Open Fixed Assets > Configuration > Asset categories and press New.
2. Enter the Code (up to 30 characters, upper-cased, unique) and Name.
3. Choose the Method: Straight line, Declining balance or Units of production. Declining balance needs an Annual rate (%) above zero.
4. Enter the Life (months) (1 to 1200; 60 is typical).
5. Choose Depreciate from: The month it is put to use, or The month after.
6. Enter the Residual value (% of cost). The default residual of an asset is its cost times this percentage.
7. Fill in the accounts: Asset cost, Accumulated depreciation, Depreciation expense, Gain / loss on disposal, Disposal proceeds clearing, and for impairments Impairment expense and Accumulated impairment. Press Use the standard asset accounts to add any that are missing from the chart and fill them in.
8. Press Save. The category is a draft.
9. A different user with asset.approve opens it and presses Activate.

The accounts must be active posting accounts of the right kind: cost, accumulated depreciation, disposal clearing and accumulated impairment are asset accounts; depreciation, gain or loss and impairment expense are expense or income accounts.

Worked example. Category IT: straight line, 36 months, residual 10%. An asset of AED 5,000.00 has a default residual of AED 500.00. The monthly charge is (5,000.00 - 500.00) / 36 = AED 125.00.

Steps: depreciation books

1. Open Fixed Assets > Configuration > Depreciation books. The financial book FIN appears automatically and posts to the ledger.
2. To add a book, enter a Code (up to 20 characters), Name and Purpose (Tax or Management) and press Add book.

A tax or management book depreciates on its own terms for reporting and posts nothing to the ledger. Without separate terms it mirrors the financial book.

What happens next

An activated category can be chosen on new assets. Its terms are copied to each asset when it is created. Changing a category later does not change assets already made.

Good to know

• An active category is not edited. Archive it and draw up a new one.
• The Capitalisation threshold field is saved but not applied; an item below the threshold still capitalises.
• There is no Archive button on the screen, and nothing stops archiving a category that assets still use.
• Per-book terms for tax and management books (life, method, residual) and the switch from declining balance to straight line cannot be set from the asset screen, so a tax book mirrors the financial terms.
• A lease or right-of-use category cannot be activated: lease accounting needs its own approved policy.
• A missing account is reported by name: for example "IT has no accumulated depreciation account."