I want to disposal of an asset. I was told to run depreciation first. So I did. Now I put the date of disposal 12/31/18 and it 'lowers' Current Accum and increased Net book amount. How do I make it show what the amounts should be after depreciating it for Dec... FIRST.?
A disposal is a calculation of depreciation and the program cannot calculate on information that is not in the asset. The rule is to have depreciation ran to some time prior to the disposal date, but that is really just to ensure the Gain/Loss calculation comes out correctly.
Depending on many factors in the asset information, you generally will not know what the final calculation will be until you do enter the disposal. Well, ok, if you gave me a screen shot of the asset prior to the disposal, I can do a hand calcu and tell you what it is going to be, assuming a calendar year with no short years in the life of the asset, but I have been doing this for a long time and got all the formulas memorized.
The thing is, just running depreciation to a date will not account for the disposal, until the disposal is entered.
You calculated depreciation for the month of December. Then, you disposed of the asset in December, and found that the amount of depreciation calculated with the disposal does not match what you first calculated before the disposition.
As a best practice, we recommend that you always record your disposals first before calculating depreciation for the fiscal period. Why? Because the Sage program always calculates depreciation to the disposal date. Depending on the applicable rules, that amount may or may not match the depreciation calculated through the end of the month.
There are a lot of rules, too many to list here, but let me offer a couple of examples to illustrate.
Suppose that a depreciation expense of $1,000 is calculated in the Tax book for an asset for the entire year of 2018. When you run the Depreciation Expense Report at the end of December, you confirm this when you see the YTD figure of $1,000 listed for the asset. Later, you dispose of the asset in December, and follow up by running the Depreciation Expense Report again. You will likely be shocked to see the YTD figure is now $500. How did that happen? Depreciation expense is calculated to the disposal date, and the IRS requires you to calculate depreciation in the year of the disposal with the same averaging convention that was used when the asset was placed in service. Typically, that's the half year averaging convention. And this rule is built into the Sage programming.
Let's turn our attention to the Internal book for the same asset. And let's assume you used the SF depreciation method. (This is a straight line method but uses a full-month averaging convention which means that you will record depreciation expense for the first month of its life, but not for the last month.) Depreciation expense will be calculated for this asset for the month of December, but if later, you decide to record its disposal in December, that amount for December will disappear. Again, it's because depreciation is always calculated to the disposal date.
What you are really asking, Scotty, is this: "how can I better understand the heuristics that are built into the Sage program so that I will have a stronger grasp on how the program is crunching the numbers?"
We teach a course with that objective in mind. Called the Principles of Fixed Assets, it is a one-day class offered through Sage University (www.sageu.com/fixedassets).
thank you. I will look into that. thanks again.