Answer

Question:  I set up a new asset and ran deprecation for several months. I discovered the value of the asset was set up incorrectly. As a result, the calculated depreciation is too high/low. How can I fix this?


Answer:  
Depending on the scope of the problem you can either dispose of and re-enter an asset (KB 21656) http://kb.abila.com/article/how-remove-asset-after-depreciation-has-been-taken

Or

You can change the value of the asset and adjust depreciation. This option assumes that the mistake was just for the amounts depreciated and was caught early on while there are significant amounts left to depreciate. It would not work for the situation where depreciation is taken in the wrong period. 

This situation usually applies were an asset is set up, but the wrong cost is put in. A few months of depreciation is taken and then the problem is discovered.

To fix this you can do the following:

1 – Fix the cost of the asset
Go to Maintain>Fixed Assets>Assets and pull up the Asset ID and look at the Depreciation Tab. If the Historical Information is grayed out that means that depreciation has been taken through the system and you will need to adjust the depreciation to correct it.  

The first thing to do is to look at the cost and correct it. If the cost is incorrect then change it to be the correct value. For example, we have an asset that should have cost $16,000 with a life of 60 months. When we look at the asset, we see this:

 

We would want to correct the Cost or Basis. Nothing else.
 


This will fix future calculations. Going forward it will calculate 
16,000/60 = 266.66 a month instead of the 15,635/60 = 256.08 that it calculated for the first 3 months. This will NOT go back and fix historical depreciation.


2 – Adjust historical Depreciation
Go to Activities>Fixed Assets>Review/Adjust Depreciation. In the adjustment screen make an adjustment for each depreciation period that is incorrect. You will make the adjustment for the difference of what was taken vs what should have been taken.

In our example we took 256.08 when we should have taken 266.66. As a result, we need to increase depreciation by 266.66-256.08 = 10.58 per month. So, we would do an adjustment for 3 months for 10.58 each month. 

 

After the adjustments are done click save. 

3 – Transfer to Accounting
After you have done the adjustments, they need to be transferred to accounting to take effect. Go to Activities>Fixed Assets>Transfer Depreciation/Disposals. Enter the information for the session and then go to the transfer tab. On the transfer tab click the All Assets button to see your adjustment.

  

After you transfer the adjustment the amount of depreciation on your asset will change and the accounting entries for that depreciation will be made.
Question: What if the value of the asset was too high and should have been lower? How do I fix that?

Answer: You follow the same process, but your adjustments are negative. If the amount of the adjustments is going to equal the total amount depreciated so far you will not be able to do this and have to dispose of the asset and re-enter in the method mentioned at the beginning of this article.

Question: What if cost of the asset is correct but the life was wrong

Answer: You would use the same process. Instead of changing the cost of the asset you would change the life of the asset to what it should be. 

If the life of the asset was increased, then you would do a month by month adjustment to reduce the amount of accumulated depreciation. The adjustment would be the difference between what was taken and what should have been taken.

If the life of the asset was decreased, then you would do a month by month adjustment to increase the amount of accumulated depreciation. The adjustment would be the difference between what was taken and what should have been taken.

Article Type
Product Info
Product Line
MIP Fund Accounting
Product Module/Feature
Fixed Assets
Product Version
2020.2
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