How Do I Record Depreciation for an Asset That Was Missed in a Prior Year?

You have an asset that was not recorded in the correct year. Now you need to make sure depreciation is recorded for it. This article explains how depreciation works in Aclarian and what steps to take depending on your situation.

How Does Aclarian Calculate Depreciation?

You do not enter depreciation amounts manually. The system calculates depreciation for you based on two things:

• The asset's useful life
• The date the asset was placed in service

Aclarian uses the straight-line method. This spreads the cost of the asset evenly over its useful life.

Here is the formula the system uses:

Monthly Depreciation = (Original Cost minus Salvage Value) divided by (Useful Life in Years multiplied by 12)

Example:
An asset costs $12,000, has a $2,000 salvage value, and a 4-year useful life.

• Depreciable amount: $12,000 minus $2,000 = $10,000
• Monthly depreciation: $10,000 divided by 48 months = $208.33 per month

The system posts the same amount every month until the asset is fully depreciated.

What Tool Is Used to Run Depreciation?

Depreciation is run using the Depreciation Schedule Form. This form works similarly to the bank reconciliation form. It is completed one month at a time, in order.

For example, if your fiscal year starts in October, you must complete October first. Once October is done, November becomes available. You cannot skip months.

Before You Run Depreciation: Check GL Mapping

Before running the Depreciation Schedule Form, make sure your GL Mapping is set up correctly. GL Mapping tells the system which accounts to use when posting depreciation.

If GL Mapping is missing for an asset type, the form will not complete. It will export a file showing which mappings are missing.

To check or set up GL Mapping:

1. Go to Capital Assets > Data Management > Asset GL Accounts Mapping
2. Click New GL Mapping or select an existing entry
3. Fill in the following:
   • Action: Depreciation
   • Asset Type: Select the correct type, such as Equipment
   • Fund: Select the correct fund
   • Department: Select the correct department. Department is required for depreciation.
   • Depreciation Expense Debit Account: Select the expense account
   • Accumulated Depreciation Credit Account: Select the contra-asset account
4. Save. Repeat for each fund and department combination.

Do not run the Depreciation Schedule Form until GL Mapping is confirmed. Correcting GL accounts after posting requires additional work.

Which Path Applies to You?

Your next step depends on whether the Depreciation Schedule Form has already been run for the period the asset was missed.

Path 1: The Depreciation Schedule Form Has Not Been Run Yet for That Period

If the form has not been run yet for the period that includes the missed asset, no extra steps are needed for depreciation.

Once the asset is in the system with the correct acquired date and it still has remaining useful life, the Depreciation Schedule Form will pick it up automatically when you run it.

Path 2: The Depreciation Schedule Form Has Already Been Run for That Period

If the form has already been completed for the period when the asset should have been included, the system cannot go back and rerun that period.

In this case, you will need to use the Journal Entry Form to manually record the missed depreciation. A journal entry is a manual correction that records accounting entries directly in the general ledger.

Your journal entry should record:

• Depreciation expense for the missed period
• Accumulated depreciation for the missed period

Please work with your finance or accounting team before posting a journal entry. This is an accounting decision that should be reviewed before any entries are made.

How to Run the Depreciation Schedule Form

Once the asset is in the system and GL Mapping is confirmed, follow these steps:

1. Go to Capital Assets > Forms > Depreciation Schedule Form
2. Select the Method: Straight Line Method
3. Select the Available Fiscal Year
4. Select the Available Month. Months must be completed in order.
5. Click Save to preview the calculated depreciation amounts
6. Review the preview to confirm the totals look correct
7. Click Submit to post the entries to the general ledger

What Gets Posted When You Run the Form?

Each completed Depreciation Schedule Form creates two journal entries:

• Debit to your Depreciation Expense account, which increases your expenses
• Credit to your Accumulated Depreciation account, which reduces the net book value of the asset

The same amount posts each month until the asset is fully depreciated.

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