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Solution ID:
250408090546223
Last Modified Date:
Wed Apr 09 09:48:25 UTC 2025
Taxonomy Path:
Case category//How do I...//processing
Author:
[email protected]
How to post asset depreciation manually
Description

Business assets, like office equipment and vehicles, lose value over time through depreciation. You can regularly record transactions to record the depreciation on your Profit and Loss report.

There are various reasons to calculate and post your depreciation manually. For example, you don't use the Fixed Assets Register, you post depreciation annually or you use a different depreciation method. The software offers both the Straight-line and Reducing balance depreciation methods.

You can post depreciation automatically when you run your month end process, if you use Sage 50 Accounts Professional. 

Cause
Resolution

Before you start

  • Set up your Fixed Asset Records. Choose either the Straight or Reducing Depreciation method

If you're not sure which method to use, check with your accountant.

  • Record the purchase of an asset before you post depreciation

This is the same process as recording other purchases. Post a supplier invoice or a bank payment to your fixed asset nominal code.

▼ Create the depreciation nominal codes

The default depreciation nominal codes are as follows. If you already have these nominal codes, follow the post the depreciation journals section.

TIP: Check the Sage 50 Accounts default codes in Nominal codes.

Nominal Code Nominal name Report Report section
0021 Plant/Machinery Depreciation Balance Sheet Fixed Assets
0031 Office Equipment Depreciation Balance Sheet Fixed Assets
0041 Furniture/Fixture Depreciation Balance Sheet Fixed Assets
0051 Motor Vehicles Depreciation Balance Sheet Fixed Assets
8001 Plant/Machinery Depreciation Profit and Loss Overheads
8002 Furniture/Fitting Depreciation Profit and Loss Overheads
8003 Vehicle Depreciation Profit and Loss Overheads
8004 Office Equipment Depreciation Profit and Loss Overheads
  1. Go to Nominal codes then select New.
  2. Complete the following information:

    N/C Enter the nominal code number that you want to create, for example, 8005.
    Name Enter the name of the account, for example, Plant/Machinery Depreciation.
  3. Click Save.
  4. If required, to create further nominal codes repeat steps 1 to 3.
  5. Click Close.

You've now created the new nominal codes. Check your chart of accounts to ensure the new nominal codes are in the correct Profit & Loss and Balance Sheet sections.

▼ Example of manual depreciation calculation

 TIP: The current value of an asset is the book value. 

  1. Calculate the depreciation rate as a decimal value, in this example, this is 25/100 = 0.25
  2. 1 - 0.25 = 0.75

0.75 to the power of 1/12 = 0.976311575

Calculate this on a scientific calculator:

  • Enter 0.75, press xy, enter (1 / 12), then press =

  1. 1 - 0.976311575 = 0.023688425
  2. Current Value of Asset x 0.023688425 = £/€236.88

    Therefore, the depreciation for the asset in Month 1 is £/€236.88

    Using the same formula, the following month's depreciation is:

    Current Value of Asset (10,000 – Month 1 depreciation) x 0.023688425

    That is, 9,763.12 x 0.023688425 = £/€231.27

    NOTE: Once you calculate the value in step 4, it's the same every month. You multiply the current book value by the calculated value.
      Year 1
    Month
    Book Value
    Monthly Depreciation
    1
    		 9763.12 236.88
    2
    		 9531.84 231.27
    3
    		 9306.05 225.79
    4
    		 9085.60 220.45
    5
    		 8870.38 215.22
    6
    		 8660.25 210.13
    7
    		 8455.11 205.15
    8
    		 8254.82 200.29
    9
    		 8059.27 195.54
    10
    		 7868.36 190.91
    11
    		 7681.97 186.39
    12
    		 7500.00 181.97
    Annual Total: - 2500.00

Write off the book value

Use journals to reduce the book value to zero and increase your depreciation expense. For example, if you purchased a vehicle for £/€10,000.00 and the current book value after depreciation is £/€7,500.00. The posting is:

N/C Name T/C Debit Credit
0051 Motor Vehicles Depreciation T9   7,500.00
8003 Motor Vehicle Depreciation T9 7,500.00  
▼ Post the depreciation journals
  1. Go to Nominal codes then select Journal entry.
  2. Enter a reference and date for your depreciation posting.
  3. Enter the relevant details for your journal entry.

    NOTE: Post a journal debit for profit and loss depreciation charges and post a journal credit for balance sheet depreciation charges.

    For example, to post £/€50.00 for motor vehicle depreciation, enter the following information:

    N/C Name Details T/C Debit Credit
    8003 Vehicle Depreciation (Profit & Loss) Depreciation charge T9 50.00  
    0051 Motor Vehicles Depreciation (Balance Sheet) Depreciation charge T9   50.00
  4. Click Save then Close.
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