You can use the disposal programs in the Fixed Assets system to record asset disposals. You can also record new asset costs for trade-in transactions. Show
28.1 Disposing of Fixed AssetsNavigation From Fixed Assets (G12), choose Transfers, Splits and Disposals From Transfers, Splits and Disposals (G1222), choose an option under Asset Disposals When you dispose of an asset, you can indicate a specific method of disposal, such as scrapped, theft, or charity. The system updates the asset master record with the disposal date (unless you enter a date in the asset master record) and indicates the method of disposal in the Equipment Status field. The system also creates the journal entries for the disposal. You must post the disposal journal entries to the general ledger and fixed assets. The disposal programs create journal entries for accounts based on the disposal account rules that you set up. These rules can be very simple or complex based on your company's needs. These rules replace information originally contained in the FDS series of automatic accounting instructions. If you must dispose of more than one ledger, a second currency ledger for instance, you can indicate which ledgers to include. In addition, different account information can be specified to preserve the cost and accumulated depreciation accounts and use a reserve account in their place. Different account information can also be used to comply with charitable deduction reporting requirements in some countries. If necessary, you can dispose of a single subledger for one or more assets. Disposing of fixed assets consists of the following tasks:
28.1.1 Before You BeginVerify that the following tasks are complete:
28.1.2 What You Should Know AboutTopicDescriptionAccessing accounts for disposal journal entriesWhen you dispose of an asset, the system must access the following accounts in order to create the appropriate journal entries:
When you void disposal journal entries, the system automatically updates the Disposal Date and Equipment Status in the Item Master table (F1201). Disposal dateYou do not have to remove the disposal date from the asset master record before you run disposal. You can leave the disposal date blank for the disposal program and the system uses the date from the asset master. If both the asset master record and the disposal program have blank dates, the system uses the G/L date.If you do use the disposal date in the disposal program and a date exists in the asset master record, you get a message that the date exists in the asset master. The date in the asset master record is not overwritten. The edit of the disposal date has been changed in the disposal programs to not force the user to remove the date disposed before disposing an asset. For assets with multiple subledgers attached, the Single Asset Disposal will prompt the user to note if the disposal date should be updated when additional costs exist. Secondary accumulated depreciation accountsIf you define a secondary accumulated depreciation account (from the SDA AAI) for an asset, the disposal program handles the balance for that account.SubledgersWhen disposals are run for assets with subledgers, the assets are disposed of at the subledger level. For example, when a cost account is being cleared, a credit is created in the cost account for each subledger and an offsetting debit is created in the net book value account defined in the disposal setup. This also happens for the accumulated depreciation account.Modifying an entryA processing option has been added to prevent the user from modifying account and amount information for a disposal journal entry.28.2 Performing Single Asset DisposalsYou can use Single Asset Disposals to dispose of assets individually. Dispose of assets individually to record the gains and losses that result from a disposal, and to record the new asset cost if there is a trade-in. You can also use Single Asset Disposals to void or delete a disposal entry for a particular asset whether it was disposed of by the Mass Disposals or Single Asset Disposals procedures. The system creates disposal journal entries based on the disposal type that you specify when you enter disposal information. You can use Single Asset Disposals to perform four types of disposals: Disposal TypeDescriptionSimple disposal (with no proceeds)Use simple disposal when the disposal does not involve proceeds. For example, use this disposal type if you dispose of an asset and do not receive cash for the asset because it was destroyed, given to charity, and so on. The system uses the business unit in the Net Book Value account that you set up in the Disposal Account Rules table. If the business unit in that account rule is blank, the system uses the responsible business unit from the asset's master record. Disposal with cash proceedsUse a disposal with cash proceeds when you receive cash for an asset. When you specify this disposal type, the system debits the Cash/Clearing account and credits the Proceeds from Sale account. If you use this disposal type, you must attach the asset item number to the cash receipt entry for the Cash/Clearing Account.The system uses the business unit from the respective disposal account rules for Net Book Value, Cash/Clearing, or Proceeds from Sale accounts. If the business unit in any of these rules is blank, the system uses the responsible business unit from the asset's master record. Disposal with trade-inUse a disposal with trade-in when you trade an asset in for another asset and there are no cash proceeds. When you use this type of disposal, you must enter the new asset's master information before you run the Single Asset Disposals program to dispose of the asset you trade in.Disposal with cash proceeds and trade-inUse a disposal with cash proceeds and trade-in when a disposal involves a combination of both cash and trade-in on an asset. Before you run the Single Asset Disposals program to dispose of the asset you traded in, you must to:
When you receive cash for an asset, you debit the cash account and credit the Cash/Clearing account. Then, when you dispose of the asset using the Single Asset Disposals program, the system debits the Cash/Clearing account and credits the Proceeds from Sale account. Performing single asset disposals consists of the following:
To enter disposal information On Single Asset Disposals
FieldExplanationDisposal MethodA user defined code (12/ES) that identifies the equipment or disposal status of an asset, such as available, down, or disposed.Type of DisposalThe type of disposal determines what journal entries the system creates. There are four types of disposals. Valid codes are: 1 – Simple disposal, no trade in and no cash proceeds 2 – Disposal with cash proceeds 3 – Disposal with trade-in 4 – Disposal with trade-in & cash proceeds Caution: If there are amounts in the Inception to Date column/Cost and Accumulated Depreciation fields on the Cost Summary screen, the asset disposal is not complete. After you successfully complete both steps of the asset disposal process, Post to G/L and Post G/L Entries to Assets, there will be no amounts in the Inception to Date column/Cost and Accumulated Depreciation fields28.2.1 What You Should Know AboutTopicDescriptionUsing a subledger and subledger typeIf you specify a subledger and subledger type in the disposal information, the asset disposal updates only the specified subledger. You can choose whether to update the disposal date or leave it blank.Trade-in and highlighted asset fieldIf the Item Number field is highlighting and the error message is 0025, Record Invalid, there is no Asset Master record set up for the new asset in the F1201 file. When you do a disposal with trade-in, you must create a master record of the new asset before you dispose of the original asset.Disposed asset and the compute depreciation journalWhen an asset is disposed, it will appear on the Depreciation Journal for tax ledgers until the end of the current fiscal year. This is done to permit accurate tax reporting. Even if no depreciation is calculated, the asset will appear on the Depreciation Journal. The asset will not appear on the Depreciation Journal for the next fiscal year once you run the Fixed Asset Annual Close. To review and revise disposal entries On Single Asset Disposals
To post the disposal entries You must manually post single disposal journal entries to the general ledger and fixed assets. To perform this task, run the following posts:
28.2.2 What You Should Know AboutTopicDescriptionPosting G/L entries to assetsThe default version of the Post G/L Entries to Assets program posts all unposted fixed asset entries. To post only disposal entries, you must create your own version of the post program and attach it to the menu option. 28.3 Performing Mass Asset DisposalsUse Mass Asset Disposals to:
The system creates disposal journal entries based on the disposal type that you specify when you enter disposal information. You can use Mass Asset Disposals to perform two types of disposals: Disposal TypeDescriptionSimple disposal (with no proceeds)Use simple disposal when the disposals do not involve proceeds. For example, use this disposal type if you want to dispose of assets and do not receive cash for them because they were destroyed, given to charity, and so on. The system uses the business unit in the Net Book Value account that you set up in the Disposal Account Rule table. If the business unit in that account is blank, the system uses the responsible business unit from the asset master records. Disposal with cash proceedsUse a disposal with cash proceeds when you receive cash for disposed assets. When you specify this disposal type, the system debits the Cash/Clearing account and credits the Proceeds from Sale account. If you use this disposal type, you must attach asset numbers to the cash receipt entries for the Cash/Clearing account.The system uses the business unit from the disposal account rule for Net Book Value, Clearing, or Proceeds from Sale accounts. If the business unit in any of these rules is blank, the system uses the responsible business unit from the asset master records. You can use processing options to run a preliminary or final mass disposal. The preliminary disposal does not create disposal journal entries. Run a preliminary disposal for proofing purposes before you run the final disposal. 28.3.1 What You Should Know AboutTopicDescriptionPreliminary DisposalThe preliminary disposal performs the following tasks:
Note: If the system finds any errors during the final disposal process, it does not create journal entries for the assets in error. Instead, the system prints an error message on the final report. Correct these errors and rerun the final disposal. Summary totalsSummary totals by ledger type and disposal account are available in the Mass Disposal program.Performing mass disposals consists of the following tasks:
To enter mass disposal information On Mass Disposals Select a DREAM Writer version and complete the appropriate processing options on Processing Options Revisions. Note: Use Data Selections to indicate what accounts you want to affect by the disposal. Company and item number are mandatory data sequence items for the mass disposal procedure.To post journal entries for mass disposals If your system requires batch approval, you must post the disposal journal entries manually to the general ledger before you run Post G/L Entries to Assets. If your system does not require batch approval, it automatically performs the post to the general ledger. You must run only the Post G/L Entries to Assets to post journal entries for mass disposals to fixed assets. 28.3.2 What You Should Know AboutTopicDescriptionG/L selectionsThe processing option for the G/L post submittal works only under the following conditions:
28.4 Disposing of an Asset EarlyA disposition is the permanent withdrawal of property from use in a trade or business or in the production of income. A withdrawal may be made by sale, exchange, involuntary conversion, retirement, abandonment, or destruction. A disposition of property before the end of its recovery period is referred to as an early disposition. 28.4.1 Required Setup for Computing DepreciationCompute Depreciation (P12850) does not require special setup because the early disposition rules have been accounted for in the P12850 program. Compute User Defined Depreciation (P12855) will require special setup to accommodate the desired depreciation results in the year of an early disposition. Disposal year rules are designed to allow an asset to calculate depreciation to meet the requirements of a disposal year convention in the year an asset has been disposed. This type of disposal would take place during the asset's life and not in the year the asset is placed in service, or in the final year when an asset becomes fully depreciated. In the first and final years of an asset's life, the First Year Spread and Last Year Spread will override the disposal rules. Use the Depreciation Rule Revisions program (P12851) and Depreciation Formula Revisions program (P12853) to establish a disposal year depreciation calculation setup as the 999 life-year rule. This 999 life-year rule needs to be set up and added to the applicable Depreciation Rule. These rules only apply to those depreciation methods using a compute direction of I or C. If you are using compute direction R or P, disposal year processing has already been accommodated; therefore, no 999 life-year rule is required. The 999 life-year rule will only be observed by the Compute User Defined Depreciation program (P12855), and for those assets that have the date disposed field populated. Performing an early disposal The following steps are to be followed in order to take the correct amount of depreciation prior to running Single Asset Disposal (P12105) or Mass Disposals (P12104).
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