• What is depreciation?
• Getting there
• Depreciation class
• Depreciation item schedule
• Creating depreciation
• Removing a depreciation schedule
• Reporting

Depreciation decreases the value of an item over a period, allowing you to expense your taxes for the item over time versus all at once. It’s a way of keeping inventory values as accurate as possible by calculating each item versus each purchase line. 

Getting there
 

From Essentials, go to Configuration > Depreciation Configuration.
 

From this screen, you can create your depreciation schedule, class, and item schedule.

 


Depreciation class

To learn how to create a depreciation class, see Step 3 in the Creating depreciation section of this article.


 

Name: This is the name of the depreciation class.

Method: This is the calculation method for this depreciation class. Always consult with your accountant about which one(s) to use. 

• Straight Line: Straight-line depreciation is the simplest method for calculating depreciation over time. Under this method, the same amount of depreciation is deducted from the value of an asset for every year of its useful life. The “straight line” is literal: If you were to graph the value of your asset over time, it would appear as a straight line from the initial cost to the point where it has reached salvage value.
• Sum of years: Accelerated depreciation. Similar to the double declining balance method, sum of years depreciation aims to depreciate a company's assets at an accelerated rate.
• Double Decline: Depreciating certain assets at twice the rate outlined under straight-line depreciation.
• Units of Production: calculates depreciation based on the unit of production and ignores the passage of time over the useful life of an asset.
• MACRS: Used for tax purposes in the U.S. MACRS depreciation allows the capitalized cost of an asset to be recovered over a specified period via annual deductions.

Salvage Percent: This is the percentage that the asset is going to depreciate over time.
 

Years: This is the asset’s useful life in years.

Depreciation item schedule

To learn how to create an Item Schedule, see Step 6 in the Creating depreciation section of this article.



Item: This is the item that is in your inventory.

Depreciation Schedule: This is the schedule that you will have for reporting.

Depreciation Class: This is the class that you have created for reporting and calculation methods.

Start Type: This is how the item is going to start depreciating.

• Purchase Date - This will start the depreciation from the purchase date till now. This will create a separate line for each month.
• Roll Previous - This will start the depreciation from the purchase date till now. This will lump all the depreciation to one line instead of multiple. 
• New Run - This will start the depreciation from the date you created the item schedule and not run the previous items.

Creating depreciation
 

To classify your items in a depreciation, you will need to give it a schedule name. This will give you a report on the asset(s) over a period of time.

1. To create a depreciation schedule, click Add.
 

2. Type in the name of the schedule that you would like. When finished, click Accept.
 

3. To add a depreciation class, click on the Add button and fill out the required information. The way an asset’s depreciation is calculated is based on the depreciation method. Each depreciation class must specify a depreciation method. If you don’t know what salvage percent or year to put, please speak with your accountant. 
 

Note: At this current time the only method that we support is Straight-Line Method.
 

4. Click Accept when finished. 
 

Now that you have your depreciation schedule and class set up, you can set up your items to depreciate.
 

5. Click on the Add button.
 

6. Next you are going to select your item, schedule, depreciation class, and start type.
 

7. Once you are finished, click Accept. 

Removing a depreciation schedule

If you need to disable a schedule, you can click on the checkmark next to the schedule and click on Disable. We do not recommend deleting the schedule.

Reporting

The depreciation report will be available at the beginning of each month and gives a detailed list of current and/or past depreciation values for items set up to be depreciated. This report will give you information that you will need from Purchase Price, Current Depreciation, and Total Depreciation, to name a few. This does NOT get entered into your General Ledger. These numbers will have to be input manually in your accounting software.

1. To get to the report, go to the Reports tab. Under General Reports, you will see Depreciation.
 

2. From here, select the criteria you would like to see. Then click Run Report.
 

Your report will look something like the below sample.
 

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