FA Retirement Accounting Entry in Oracle apps R12

 

             Retirement:  

             The following the accounting entry generated at FA Module Level and code combination                                                                   derived from which setup is mentioned below.

                  Accumulated Depreciation……...Dr.                     (Dep Charged till Date) (Asset Category)

                  Proceeds of Sales clearing a/c… ..Dr.                     (Asset Sold for)  (Book Controls)

                  Cost of removal A/c ………………Dr                                                 (Book Controls)

                  Net Book Value Retired …………..Dr                                                   (Book Controls)

                                          To Asset Cost………………..Cr               (Total Asset Cost)  (Asset category)

                                          To Gain/Loss a/c…………….Cr               (Profit or Loss A/c)

                                           To Proceed for Sales ………….Cr                               (Book Controls)

                                           To Cost of Removal Clearing A/c….Cr                       (Book Controls)

 

 

                Create AR Transaction.

 

                             Receivables  A/c………..Dr

                                         To Proceed to Sale Clearing A/c………….Cr

 

                 Create AP Invoice

 

                               Cost of Removal Clearing A/c………………….Dr

                                             To AP liability A/c…………………………………Cr

Incase of data migaration point to be remebered for Fixed Asset Data Upload

Note: Any value entered in Accumulated depreciation Field system will calcualted depreciation for Current Period only. If no value entered in depreciation Field system will calculate depreciation from beginning of the asset.

Case Study 1: Create a new asset, With Accumulated Depreciation(let's say X)  and YTD Depreciation.    

Run Depreciation to Calculate current Method Depreciation. In Accumulated Deprecation , system will calculated current method Depreciation
and add to accumulated deprecation as entered while creating asset(X Value + current Period Depreciation)
while running create Accounting. System will Generated accounting
Entry for Asset addition and Current month Depreciation but no accounting entry will be created for accumulated Depreciation entered while Creating Asset..
If Accumulated Depreciation is entered, System will calculated Depreciation for current Period only.

Illustration:

Asset Cost: 10000
Accumulated Depreciation: 500
Date Place in Service : 01-JAN-2013
Depreciation Method Life: 40 Yrs.   (480 Months)
After Running Depreciation for MAR-16
Deprecation calculate for the period= Asset Cost/ Life in months=  10000/480= 20.83
Now
Accumulated Depreciation will be 500+ 20.83=   520.83.

Accounting entry will be generated for Asset Addition as below

Asset Cost A/c............Dr   10000
      To Asset Clearing A/c.......................Cr   10000

Accounting entry will be generated for Depreciation as below

Depreciation A/c..............Dr   20.83
                   To Accumulated Depreciation A/c....20.83
Note: No Accounting will be generated for Accumulated Deprecation entered before running Depreciation.

Case Study 2: Create a new asset, With Accumulated Depreciation as null and YTD Depreciation as null and when you save record. System will create YTD Deprecation and
accumulated Depreciation till Previous Period.
Run Depreciation to Calculate current Method Depreciation.   
while running create Accounting. System will Generated accounting
Entry for Asset addition and Current month Depreciation but no accounting entry will be created for accumulated Depreciation.
If Accumulated Depreciation is entered, System will calculated Depreciation for currrent Period only.

Illustration:

Asset Cost: 10000
Accumulated Depreciation:  NULL
YTD Depreciation: NULL
Date Place in Service : 01-JAN-2013
Depreciation Method Life: 40 Yrs.
after Running Depreciation for MAR-16
Deprecation calculate from Date place in Service: 20.83 (Dep per Month)* 39(Till Current Month)= 812.5
Now
Accumulated Depreciation will be = 812.5
YTD Depreciation will be=812.5.


Accounting entry will be generated for Asset Addition as below

Asset Cost A/c............Dr   10000
      To Asset Clearing A/c.......................Cr   10000

Accounting entry will be generated for Depreciation as below

Depreciation A/c..............Dr   812.5
                   To Accumulated Depreciation A/c....812.5
Note: Depreciation Accounting will be generated from Date place in service to till Date

Accounting Entries for Assets Module in Oracle Apps

Depreciation Accounting:
Depreciation Expense A/c...........Dr.
              To Accumulated Depreciation A/c.............. Cr.

Asset addition Accounting:
In Payable module, At the time of Invoice the following accounting is generated
Asset Clearing A/c .........Dr.
               To Account Payable liability A/c................Cr.
In Asset module, At the time of addition of asset the following accounting is generated
Asset Cost A/c...................................Dr.
               To Asset Clearing A/c.................................Cr

Merger Accounting:
Asset Cost A/c .................................. Dr. 4000
                To Asset Clearing A/c.....................................Cr 3000
                To Asset Clearing A/c ....................................Cr 1000

Construction In Process(CIP) Addition Accounting
CIP Cost A/c.........................................Dr
                 To CIP Clearing A/c............................................Cr.

Capitalization Accounting: Transfer CIP asset to capitalize asset.
Asset Cost A/c.....................................Dr.
                To CIP Cost A/c …...................................Cr.

Amortized Accounting:
Depreciation Expense A/c...........Dr.
                To Accumulated Depreciation A/c.............. Cr.

Asset Transfer Accounting:
From Department transferred
Accumulated Depreciation A/c....................Dr.
                 To Asset Cost A/c...................................Cr
To department transferred
Asset Cost A/c.........................................Dr
Depreciation Expense A/c........................Dr
                   To Accumulated Depreciation A/c...................Cr

Reclassification accounting: When you reclassify an asset from office equipment to computers.
The accounting as follows.
Office Equipment:
Accumulated Depreciation A/c....................Dr.
                   To Asset Cost A/c...................................Cr
Computer Head
Asset Cost A/c.........................................Dr
Depreciation Expense A/c........................Dr
                    To Accumulated Depreciation A/c...................Cr.

Revaluation:
Positive Revaluation
Asset Cost A/c.............................Dr.
                   To Revaluation Reserve A/c........................Cr.
                   To Accumulated Depreciation A/c.............. Cr.
Negative Revaluation:
Revaluation Reserve A/c..................Dr
Accumulated Depreciation A/c.........Dr.
                   To Asset Cost A/c …...............................Cr.

Retirement:  

Accumulated Depreciation ..........Dr.                 (Dep Till Date)
Proceeds from Sale Asset Clearing A/c.....Dr.   ( Sale Value)
                    To Asset Cost.........................Cr    (Total Asset Cost)
                    To Profit/Loss..........................Cr   (P/L for Asset)

Fixed Assets

                                  Key flexfields in FA.
There are three Key Flex Fields in Fixed Assets:
            1. Category KFF.
            2. Asset Location KFF.
            3. Asset Key KFF.
I. Category Flex Field: Category Flex field is used to categorize the assets. It is mandatory flex field. We can define minimum 2 segments and Maximum up to 7 Segments. One is Major segment another one is Minor Segment.
II. Location Flex Field: It is mandatory flex field which is used to track assets are located in which place and to identify what are all assets located in a particular place. We cannot define new location structure, we can use standard one available. We can add up to 7 segments. 
III. Asset key Flex Field: It is optional Flex field, which is used to group the Assets based on the Organization requirement. We cannot define new structure but we can add up to 10 segments. No FFQ to Asset Key Flex Field Segment. 

System Controls.

System Control form is used to specify your Company name,Asset numbering scheme, Key Flex field structures, Oldest date of asset placed in service as 01- Jan- 1850. 

Calendars.

There are three types of calendars
                 1. Fiscal Calendar
                 2. Depreciation Calendar        

                3. Prorate convention Calendar 
Fiscal Calendar: Based on the asset life we have to create Fiscal Calendar. For example 1976 to 2030. 
Enter Name for your Fiscal year Specify the start and end dates of each fiscal year for a fiscal year name. 
Create fiscal years from the oldest date placed in service through at least one fiscal year beyond the current fiscal year. 
Depreciation will fail if the current fiscal year is the last fiscal year. 
You can set up multiple fiscal years in this window. 
You can assign different fiscal years to your different corporate books. 
The calendar for a tax book must use the same fiscal year name as the calendar for the associated tax book. 
Place cursor on from date and press ↓ down arrow 
System will be creating fiscal years automatically. 
Depreciation Calendar:
The Depreciation Calendar determines the number of accounting periods in a fiscal year. Depreciation calendar is used to calculate depreciation. 
Prorate Calendar:
The Prorate Calendar determines the number of prorate periods in your fiscal year and to prorate the depreciation from which date to which date we have to consider.

Depreciation Methods

Depreciation means gradual and permanent decrease in the value of the asset due to the usage of asset, loss or theft of an asset. There are five standard depreciation methods in Oracle.
                       1. Flat                       
                       2. Calculated
                       3. Production
                       4. Table
                       5. Formula 
Straight line method: We will set a fixed amount for a fixed period as depreciation. For example: Asset cost 1 Lac, asset life 5 years, so depreciation per year 1 Lac / 5 = 20000 
Diminution method: depreciation will be calculated on written down value of asset. 
For example:
Year 1 

Asset value 500000
Depreciation 10% 50000
Balance 450000
Year 2 

Depreciation 10% 45000
Balance 405000
Year 3 

Depreciation 10% 40500
Balance 355000 
Production Base: Depreciation will be calculated on the production units. 

Asset Book 

In Assets Module, Journals will be created based on the asset book. This Asset book will be associated with the particular Ledger. Asset book will determine the:  

               1. Calendar 
               2. Accounting Rules 
               3. Natural Accounts 
Pre requisites to create Asset Book: 
               1. Specify System Controls 
               2. Define Calendars 
               3. Set up your Account segment values and combinations 
               4. Set up your journal entry formats. 
In Fixed Assets we have three types of books: 
               1. Corporate Book 
               2. Tax Book 
               3. Budget Book 
Corporate Book: 
This is also called Depreciation book, Asset book and Asset Register. Corporate book is used to maintain the Asset information and to maintain Depreciation information. Depreciation information will be maintained as per Companies Act. 

Tax Book: 
We will maintain the depreciation information as per Income tax Act. We will copy the Asset information from the corporate book to Tax book. We maintain companies Act and IT Act for depreciation, if the % of depreciation is different for companies act and IT act. 
Budget book: 
We will maintain capital Budget information. The Asset information also required in the tax book. It is an automatic activity. We will copy the asset information from the corporate book to the tax book. We have 2 options to copy the information: 
                1. Initial mass copy. 

                2. Periodic mass copy. 

Asset Categories

Asset Category is used to group the Assets based on the Depreciation method and Rate, and also building a relationship with the Asset book. Category information is common for a group of assets. Oracle Assets defaults these depreciation rules when you add an asset, to help you add assets quickly. The default depreciation rules that you set up for a category also depend upon the date placed in service ranges you specify. 

Pre requisites to set up Asset categories: 
      Set up Category Flex Field
      Set up depreciation Book     

      Setup Depreciation Calendar & Prorate Convention Calendar 
      Setup Depreciation Methods 
Type of Assets 
Assets are again 3 types as per Fixed Assets 
                 1. Capitalized 
                 2. CIP 
                 3. Group Assets 
Capitalized: Which Assets are ready to use and are ready to place in service.
CIP: Construction in process: An asset which is under construction, for example building under construction. CIP asset will changed to capitalized when it starts service.
Group Assets: Grouping the assets related to same group.

Asset Addition.

Creation of assets information in the oracle Assets application is called Asset additions. There are 3 types of Asset additions.        
                1. Detailed Addition
                2. Quick Addition
                3. Mass addition
Difference between Detailed addition and Quick addition:
For detailed additions we have to navigate several windows to enter an asset. (Additions, Book and Assignments). Whereas through quick addition button asset information will be maintained by navigating single window only. Latter detailed information would be updated. 
Detailed Addition. It is used to add a new asset with detailed information to the system. Through Detailed addition we can perform transaction such as retirement, adjustments and transfers.
Step 1: In Asset Workbench window, Click on "addition" button to create a new asset.
Step 2: Give mandatory info like Asset type, Asset Category, Description and units.
Step 3: Click on Continue, In books window, Select the corporate book and give mandatory info such as current cost, Salvage value, Depreciation Method, date in service and Prorate Conversion.
Step 4: In assignment Window, give employee Name, Expenses A/c and Location.

Mass Addition

Process of transferring fixed assets related data from Accounts Payables to Fixed Assets is called Mass additions. After transferring data from AP, data will store in interface tables.
AP --> FA Mass additions interface tables --> FA
The data which is there in “FA Mass additions interface tables” we can see from FA application. If you want to convert the invoices information to Assets, we can add necessary data at interface tables, then the data will store in FA base tables.

Setup Step:
Step 1: Create Standard Invoice in Accounts Payables. Choose Account as “Asset clearing Account” in the distribution. 
Step 2: Place curser on Account field --> Show Field and click on "Track as Asset".
Step 3: Transfer to invoice to General Ledger.
Step 4: Run Journal Import program from GL
Step 5: Run Mass Additions create in AP. This program will transfer AP data to FA.
Step 6: Prepare Mass additions in F.A.
Step 7: Run Post Mass additions program.
Step 8: Query the Asset in the Asset work bench.

Conversion of CIP to Capitalize asset.

Asset which is there under construction is called a CIP Asset. Simply we can say, the asset is not at used (i.e., not placed in service.)
Step: 1 Create a CIP Asset
Step: 2 Convert CIP Asset to Capitalize Asset.
Step: 3 Query the Asset and enter detailed information.

Asset Transfer

Asset transfer refers to changes in the assignment of 
               1. Employee          
               2. Expenses Account 
               3. Location Asset transfer can be done in 2 ways. 
               1. Individual Asset transfer. 
               2. Mass Asset transfer. 

Asset Changes

Asset Changes can be made to the Assets for the following fields:                     1. Asset Cost
                2. Life of the Asset 
                3. Depreciation Method and Rate
It can be done in 2 ways: 
                 1. Individual Changes 
                 2. Mass Changes 

Asset Revaluation

Asset Revaluation is used to increase or decrease in the asset cost. Revaluation can be done in two ways.
                1. Individual Asset.
                2. Mass Revaluation.

Asset Reclassification

Make changes for Asset Category is called Reclassification. In Oracle reclassification can be carried out only for Asset Category. It can be done in 2 ways.          

      1. Individual Asset reclassification 
      2. Mass Assets reclassification 

Retirement 

For every asset there will be a useful life of period. Once this period completed every asset should me retired. Some other reasons for retirement: Sale of Asset, Theft, Life of asset and Damage of asset. Run depreciation before retirement of asset

Roll back depreciation

If we run the depreciation without period close, then we cannot make any modifications. Then if we want to do any modifications we have to do “Roll back depreciation”.

Split

Split is dividing the Assets into individual units of assets. 
Example: We purchased 5 plants at a time for Rs 5 Lacks and we received only one invoice for all the plants. We enter this invoice through Accounts payables. Now we are sending this information to FA through Mass Additions. Now we want that 5 plants information differently. So we will split that into 5 plants. 

Merge

Merge is a process of adding multiple assets to a single Asset. Example: We have one asset like Computer. Now we are purchasing first monitor and then CPU.Now we are having 2 invoices in AP. Now this will be transfer to FA through Mass addition.These two invoices should be merged because they are single Asset.