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Depreciation

The Depreciation sub-module in Finance handles the recording and management of fixed asset depreciation in the accounting system. Fixed assets such as machinery, vehicles, equipment, and other capital items lose value over their useful life, and this loss must be systematically recorded through depreciation entries. JobNext generates appropriate accounting vouchers for each depreciation entry, ensuring that the books of accounts accurately reflect the current value of your assets.

How to View Fixed Asset Register 0:38
Navigation

Access Depreciation from Finance > Depreciation. This sub-module works in conjunction with the Equipment module, which manages the physical asset records and depreciation schedules.

Depreciation Cycle

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Asset Register Equipment module Cost, method, rate Calculate SLM or WDV method Period & rate applied to book value Generate Voucher Journal entry DR Depr. Expense CR Accum. Depr. Approve Post to GL Book value reduced Updated Net book value Asset schedule refreshed Repeat each period (monthly / quarterly / annually)
Depreciation recording screen showing fixed assets, book values, calculated depreciation amounts, and voucher generation
Depreciation voucher generation for fixed assets

How Depreciation Works

When depreciation is recorded for a fixed asset, the system creates a journal voucher with the following accounting entries:

Account Debit / Credit Purpose
Depreciation Expense Debit Records the periodic depreciation charge as an expense in the profit & loss statement
Accumulated Depreciation Credit Increases the contra-asset account that tracks total depreciation over the asset's life

The net book value of the asset at any point is calculated as:

Net Book Value = Original Cost - Accumulated Depreciation

Accumulated Depreciation Tracking

JobNext maintains a running total of accumulated depreciation for each fixed asset. This figure represents the total depreciation recorded since the asset was placed in service and is critical for:

  • Balance Sheet reporting — Accumulated depreciation is shown as a contra-asset, reducing the gross value of fixed assets on the balance sheet
  • Net book value calculation — Determining the current carrying value of each asset
  • Disposal accounting — When an asset is sold or scrapped, the accumulated depreciation is used to calculate gain or loss on disposal
  • Insurance valuation — Providing current asset values for insurance purposes

Recording Depreciation

To record depreciation for fixed assets:

How to Create Depreciation Vouchers 0:38
  1. Navigate to Finance > Depreciation
  2. Select the Accounting Centre and the period for which depreciation is being recorded
  3. The system displays the list of fixed assets eligible for depreciation, along with their current book values and calculated depreciation amounts
  4. Review the depreciation amounts for each asset
  5. Click Generate Depreciation Vouchers to create the journal entries
  6. The generated vouchers enter the standard approval workflow
  7. Once approved, the depreciation entries affect the books of accounts
Depreciation Before Disposal

Depreciation must be recorded for a fixed asset before it can be disposed of (sold, scrapped, or written off). The disposal process requires the accumulated depreciation to be current so that the correct gain or loss on disposal can be calculated. Attempting to dispose of an asset with outdated depreciation records will produce incorrect financial results.

Voucher Generation

Each depreciation recording session generates one or more journal vouchers. The characteristics of these vouchers are:

  • Voucher Type — Journal (since depreciation is a non-cash transaction)
  • Automatic Generation — Vouchers are system-generated based on the depreciation schedule and calculations
  • Approval Required — Like all vouchers, depreciation entries require approval before they take effect
  • Job Assignment — Depreciation vouchers can be assigned to the job where the asset is currently allocated, enabling project-level cost tracking
  • Tally Export — Approved depreciation vouchers are included in the Tally export data

Integration with Equipment

The Finance Depreciation sub-module works closely with the Equipment module:

  • Asset Register — The Equipment module maintains the physical asset register with details like acquisition cost, useful life, and depreciation method
  • Depreciation Schedules — Depreciation rates and methods are configured in the Plant module and used by Finance for calculations
  • Asset Allocation — The job to which an asset is currently allocated determines the cost centre for depreciation charges
  • Disposal Workflow — Asset disposal in the Plant module triggers the Finance module to verify that depreciation is current before processing the disposal accounting
Tip

Record depreciation on a consistent schedule (monthly or quarterly) to ensure that financial reports always reflect accurate asset values. Irregular depreciation recording can lead to misleading financial statements and complications during audits.

Best Practices

  • Maintain a regular schedule — Record depreciation at the same interval (monthly or quarterly) throughout the financial year
  • Review before approval — Verify depreciation amounts against the asset register and depreciation schedules before approving the generated vouchers
  • Keep depreciation current before disposal — Always run depreciation up to the disposal date before processing any asset disposal
  • Reconcile with Plant module — Periodically cross-check the accumulated depreciation in Finance against the asset records in the Equipment module
  • Document depreciation methods — Maintain clear records of the depreciation method and rate used for each asset class for audit purposes