Ledgr/Documentation/Fixed assets

Fixed assets

The things you bought that last more than a year — the bakkie, the laptops, the shop fit. Ledgr keeps the register, charges depreciation every month, and works out the gain or loss when you sell one.

Why this is not just an expense

A R40 000 laptop put through as an expense makes one month look terrible and the next three years look better than they are. Capitalising it spreads the cost over the period you actually use it, which is both what IFRS for SMEs requires and what SARS expects to see on the ITR14. It also means the asset appears on your balance sheet, which matters the first time a bank or a landlord asks for one.

Asset classes and write-off periods

Pick a class when you capture the asset and Ledgr fills in the write-off period from SARS' Binding General Ruling 7 — the periods an SA business is actually allowed to claim, so a default schedule is one your accountant will recognise.

Each class names the pair of accounts its cost and its accumulated depreciation land in, which is what lets the balance sheet show them netted against each other.

Capturing an asset

1. Reports → Fixed assets → New asset
2. Describe it and pick its class

   Serial numbers and locations are worth filling in. The register is what an insurance claim or an audit is answered from.

3. Cost and the date you brought it into use

   Depreciation runs from the date it was available for use, not the date on the invoice.

4. Residual value, if you expect one

   What you think it will still be worth at the end. Leave it at zero if you do not expect to recover anything — that is the normal case for computers.

5. Confirm the method and the life

   Both are pre-filled from the class. Change them if this asset is genuinely different.

The two methods

• Straight line — cost less residual, divided evenly over the months. The same charge every month. Right for most things.
• Reducing balance — a percentage of what the asset is still worth, so the charge is largest in the first year and tapers. This is the common commercial treatment for vehicles, which is why it is the default there: a bakkie really does lose most of its value early.

The monthly depreciation run

Depreciation is charged monthly, not once a year, so the profit and loss you look at in August already carries August's depreciation instead of a surprise arriving in February.

The run posts one journal per period: depreciation expense debited, accumulated depreciation credited. It is safe to run twice and safe to run after a gap — each asset records the period it has been depreciated through, so a run after three months away produces exactly three months of charges, once.

Revising a life

If it becomes clear an asset will last longer or shorter than you thought, change the remaining life. Ledgr applies the new life forward and does not rewrite the depreciation already charged — which is correct: a change in estimate is not an error, and restating closed periods would move numbers in books you have already reported.

Selling or scrapping one

Record the disposal with its date and what you received. Ledgr removes the cost and the accumulated depreciation from the balance sheet, compares the proceeds against what was left, and posts the difference as a gain or loss on disposal. Scrapping is the same thing with proceeds of nil.

The asset stays in the register, marked as disposed. Deleting it would be deleting the history the disposal journal refers to.

What it feeds

• The balance sheet — cost less accumulated depreciation, by class.
• The income statement — the monthly depreciation charge.
• The fixed asset register itself, which is what an auditor asks for first.
• The ITR14 — see SARS returns. Ledgr's depreciation is the accounting charge; the wear-and-tear allowance SARS permits is worked out from the same register at year end.