Enabling Automatic Depreciation Rates

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I’ve seen this topic has already been raised, however the linked guides are unavailable.

Is anyone able to tell me how to activate the ‘depreciation rate’ in the fixed asset form?

I have fixed assets which are linked to their respective transactions, have a control account (e.g. power tools) and an expense account (e.g. equipment (tools) ). I have these fixed assets linked to a ‘year end depreciation’ depreciation entry. I would expect the ‘depreciation rate’ to kick in, but the only way I can implement any depreciation is by manually entering an amount.

I want to avoid manual entry as I have quite a few fixed assets, and if I need to manually copy over values and divide them, I open up the potential to make errors. In my use case I’d say some assets will last 5 years, so 100% / 5 years will give me a 20% depreciation rate. I would make a depreciation entry for when the asset/s were acquired.

Any help would be much appreciated! Manager IO has helped me understand a lot more about accounting (as a sole trader) and getting depreciations to work automatically would be the last piece of the puzzle (until my accounting gets more complex :smiley: )

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Hello @Domenico,

You can do semi automated depreciation in Manager by copying Depreciation Calculation Worksheet report to a new depreciation Entry.

However, this only works if you are using Double Declining Depreciation method.

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Thank you @Ealfardan . I can now see that using the depreciation calculation worksheet report allows me to create depreciation entries automatically. I can set the worksheet report date to EOFY and run this report to generate a depreciation entry for multiple assets each tax year.

To understand the formula being used, I tested out 100% depreciation and generated the report from the asset purchase date to a year ahead (minus 1 day) and it gives me the total asset cost. If I use a 50% depreciation, I get 50% of the total cost in the 1st year and then 50% of the depreciated value in the 2nd year e.g. if original asset cost is $1000 and set at 50% depreciation rate, year 1 is $500, year 2 is $250.

So the ‘double declining’ formula for each asset seems to be: (original asset value - depreciation) × (report date range factoring purchase date / days in year) × depreciation rate %… So unlike the linear approach, the asset value doesn’t really ever reach 0. Which in fairness is probably a better reflection of reality, unless an asset has a literal expiry where it needs to be taken out of service.

I also added a payment to a fixed asset, and I noticed it increases the book value. This is really handy, because if I have an asset which I improve with a repair or upgrade I can add it and the depreciation rate will apply to the new book value.

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@lubos I wish to add that the implementation of automated depreciation, particularly via the straight-line method, is long overdue. While numerous features have been requested by users, and some you yourself have considered adding, certain fundamental capabilities remain unaddressed. These functionalities are indispensable in today’s fast-paced work environment, where accountants are tasked with a multitude of responsibilities and cannot afford to expend time on routine calculations such as depreciation or amortization.

Users should be empowered to provide input on an asset for an optional automated depreciation workflow, encompassing the following parameters:

  • Asset Cost: The total acquisition cost, derived from invoices, journal entries, or payment records.

  • Date of Purchase

  • Depreciation Commencement Date: To be used for depreciation calculations. If unspecified, the purchase date will serve as the default. Not all assets are depreciated immediately; some may be retained for investment purposes or pending commissioning.

  • Depreciation End Date: The estimated conclusion of the asset’s useful life, adjustable in the event of early disposal.

  • Estimated Residual Value (Scrap Value)

  • Depreciation Method: Options may include Straight-Line, Double Declining Balance (DDB), or Sum-of-Years’ Digits (SYD).

  • Posting Interval: Frequency at which depreciation is recorded, annually, semi-annually, monthly, weekly, or daily.

In addition, when an asset is disposed of before its estimated end date, the system should perform pro-rata calculations to determine gains or losses on disposal accurately.

The adoption of such a workflow would enable Manager to relieve accountants to concentrate on higher-value activities such as financial analysis and decision support. A “Recalculate” button, similar to the functionality in the inventory module, could be provided to apply the specified depreciation parameters to assets efficiently and accurately.

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