Integration of CAPAX Purchase

with Fixed Asset – e.Chain 4.5

CLASSIFICATION OF FIXED ASSETS

Fixed Asset

Assets that do not have a definite existence are called intangible assets. They have neither a physical form nor give their owner definite

financial rights.

DEPRECIATION

Causes of depreciation:

Wearing out

Using up or

other reduction in the useful economic life of a tangible fixed asset whether arising

From use,

Effusion of time or obsolescence

FACTORS TO DETERMINE DEPRECIATION

- the cost of the fixed asset;

- the (estimated) useful life of the asset;

- the (estimated) residual value of the asset

- the method of depreciation

STRAIGHT LINE METHOD

• It is simplest and most commonly used method

• Calculation based on Purchase or acquisition price

• Salvage value / Scrap Value / Residual Value divided by the total productive years

• Till the end of life of asset, Depreciation will not vary and remains constant

(Purchase Price of Asset - Approximate Salvage Value) ÷ Estimated Useful Life of Asset

FORMULA FOR STRAIGHT LINE METHOD

Applicable to machines that have high rates of depreciation in the initial year or

two, and later taper it e.g. a car, is a usable method.

Written-down value is also called book value or net book value. It is calculated by

subtracting accumulated depreciation or amortization from the asset's original

value.

Also called as diminishing balance method or Reducing Instalment Method. This

accounting technique reduces the value of an asset by a set percentage each year

WRITTEN DOWN VALUE METHOD

FORMULA FOR WRITTEN DOWN VALUE

Rate of depreciation = 1-(salvage value/Cost of asset)^(1/n)

n-> useful life of the asset.

This rate of depreciation is charged on the net book value of the asset of each year.!

The depreciation rates are high at the start and low towards the end of useful life of the asset

BOOKS OF DEPRECIATION

Books of Depreciation

Corporate book

Straight – Line method

Schedule 6

Tax Book

Written Down method

e.Chain Fixed Asset Management

e.Chain Fixed Asset Management

e.Chain has the Feature of Tracking assets of business uses internally including but

not limited to computers, tools, software, or office equipment.

e.Chain allows companies to track the assets, where each is located, who has it,

when it was checked out, when it is due for return, when it is scheduled for

maintenance, and the cost and depreciation of each asset.

e.Chain has the reporting option that is built into most asset tracking solutions

provides pre-built reports, including assets by category and department,

check-in/check-out, net book value of assets, assets past due, audit history, and

transactions.

FIXED ASSET INTEGRATION WITH INVENTORY

Procurement of Capital Item will be is the part of Fixed Asset Register and it will be

stage of CWIP and Capitalisation.

Assignment of Part Number (LOT / Serial) to specific Category of Asset Category.

Asset which is created will be defaulted in CWIP process which can be changed to

capitalized for which the depreciation is to be calculated.

ASSET CATEGORY

Asset Category

DEPRECIATION METHOD

Definition of Method of Depreciation and its percentage also the statutory books.

DEPRECIATION TYPE

WDV – Written Down Value - Depreciation percentage.

SLM – Straight Line Method It is Sub divide d by two types as a. Percentage - Depreciation Percentage. b. Life Period - Depreciation Up to Max and either Life Period or Life months.

E.CHAIN DEPRECIATION

Depreciation / day: (orginal cost – salvage cost) /

((life year * no.of days in a year) + life month * no.of the days in a month))

Maximum depreciation: (orginal cost – (orginal cost – accumulated depreciation )) * 100 / Original Cost > Max Depreciation Percentage

PRORATE CONVENTION

Prorate convention is used to capture prorate date.Prorate date overwrites the date placed in service for depreciation calculation during the first year of asset's life.

ASSET

Asset master form which contains the asset and the depreciation details

ASSET RETIREMENTS

When an asset is considered retired, when it is permanently taken out of service, such as through sale or disposal.

Retirement obligations can be done through this form.

DEPRECIATION REPORT

Calculation of Depreciation can be done for Month / Year wise with the provision of Test Run and Final Run

DEPRECIATION REPORT

The detailed report of the depreciation calculated for the assets.

SCHEDULE-6 REPORT IN E.CHAIN

Prepared & Presented By

SIVAKUMAR.T.RSenior Project ManagerChain-Sys India Pvt Ltd.,Chennai