Assets owned by your company deteriorate and lose their value over a financial year. This is depreciation and can be tracked through MYOB.
In this session you will:
gain an overview of managing fixed assets
learn how to add a new asset to MYOB
learn how to adjust historical balancing
learn how to allocate depreciation for an asset
learn how to make loan repayments on an asset
learn how to create a recurring asset transaction.
By the end of this session you will know some important strategies for dealing with fixed assets.
8.1 Overview Of Fixed Assets
Your company will most likely need to purchase relatively expensive and fixed assets.
These can include the furniture in the office, the equipment in the factory, the motor vehicles driven by the sales people, and even the building in which the business is housed.
While the tax office does not allow you to write the expense of these assets off in a full year, it does allow you to write off a depreciation amount. This depreciation amount is an attempt at applying a monetary value to the wear and tear and loss of resale value of an asset item within the current year.
Fixed assets, because of their nature, are usually relatively expensive to purchase. They are often purchased with a loan or through a lease which requires periodic and regular repayment.
All of these factors make asset management within MYOB a challenge.
For the rest of this session you will help Fred Bloggs account for a new item of equipment that he has acquired.
Fred has had the opportunity of purchasing a new Turbo-generator machine. This machine allows you to refurbish white goods - you place the defective or old item in the Turbo-generator, flick the switch, and within the minutes the item comes out at the other end completely rebuilt, repainted, and refurbished. Perfect for Fred's business and too good an opportunity to miss!
The Turbo-generator costs $35,400. Fred doesn't want to pay cash for this as this will impinge upon his cash flow. As a consequence he has taken out a loan with LoanShark Financials for $35,400 over 5 years. The monthly repayments are $893.95.
Fred has discussed the purchase with his accountant. His accountant has told him that the item can be depreciated by 30% per year. This is $10,620 per year, or $885 per month.
8.2 Adding A New Asset
The first task is to add the new item as an asset in the company accounts.
The asset will be added as a fixed asset account. There will most likely already be asset accounts. You can therefore add the item to these existing accounts or create new ones.
In Fred's chart of accounts there are no asset accounts for plant and equipment. So the first thing that we will do is to add a new header account for Plant and Equipment. We can then add detail accounts for the actual items themselves.
The most accepted way of dealing with a capital asset is to include an account that represents the value of the item at cost, and to add a depreciation value account that reflects the accrued depreciation on the item. The at cost account will contain a positive amount, while the accrued depreciation account will contain a negative amount - the amount lost from the assets cost since the original purchase.
The two accounts added together will reflect the true current value of the asset.
Exercise 39: Adding a New Asset
Note: In this chapter you will need to use the data file called Extended – Fixed Assets.myo. If MYOB has started use File, then Open and open this data file, or start MYOB and open Extended – Fixed Assets.myo from the Welcome screen.
1. Click on to display the Accounts command centre
2. Click on Accounts List to display the Accounts List dialog box
Notice that we didn't add an opening balance for the accrued depreciation. The value of this account will be regularly updated as we enter the periodic depreciations.
Poor old MYOB is now distraught at what you have done. According to your activities you have purchased an item of plant which cost $35,400.
However, MYOB doesn't know where the money for the purchase came from. Was the item purchased for cash? Was a loan taken out? Did Fred win Tattslotto?
The balance sheet for Bloggs Appliance Centre is therefore out by $35,400. Until MYOB is told how the item was financed this amount will reside in the Historical Balancing equity account - this is the purgatory account for naughty transactions that have neither gone to the left nor right side of the accounting ledger!
If Fred paid by cheque this amount would come out of the cheque account and the Historical Balancing would be corrected.
However, Fred has taken out a loan to pay for this equipment. A loan is a liability to the company. We will resolve the historical balance by creating an offset liability account for the loan. As time moves on the regular periodic loan repayments will eventually wipe out the loan and all will be sweet.
Exercise 40: Adjusting the Historical Balancing
1. Ensure that the Accounts command centre appears
2. Click on Accounts List to display the Accounts List dialog box
3. Click on the Equity tab and notice how Historical Balancing shows $35,400
Make no mistake about it, MYOB does not calculate depreciation - you must do this yourself. However, MYOB does allow you to track depreciation and to update the current real value of the asset.
To do this you must enter the depreciation for the asset after you have calculated it.
A common method of doing this is to use a journal entry either on an annual basis or on a more regular basis. The journal entry will need to debit a Depreciation expense account, and credit the accrued depreciation asset account for the item.
Fred is a little fastidious and would like the adjustment to be made on a monthly basis.
Exercise 41: Allocating Depreciation
1. Ensure that the Accounts command centre appears
2. Click on Record Journal Entry to display the Record Journal Entry dialog box
3. Type 2/10/2005 in Date and press to jump to Memo
4. Type Turbogenerator depreciation – Oct 2005 and press to jump to Acct #
If you will be creating adjustments on a regular basis consider setting the journal entry up as a recurring journal.
8.5 Making Loan Repayments
Accounting for the asset is one thing - accounting for the payment of the asset is yet another.
In our case study Fred has borrowed $35,400 from LoanShark Financing. He is required to repay the loan in monthly instalments of $893.95. This is done using the Write Cheques facility.
Exercise 42: Making Loan Repayments
1. Click on to display the Card File command centre
2. Click on Cards List to display the Cards List dialog box
17. Scroll down to and click on 2-2300 Turbogenerator Loan, then click on
18. Click on to record the cheque
19. Click on to close the Spend Money dialog box
You have now completed this exercise.
8.6 A Combined And Recurring Asset Transaction
Since the depreciation activity is performed monthly, and the loan repayment is performed monthly, and they are both regular and predictable, it makes sense to combine them into one transaction.
It also makes sense to make that combined transaction a recurring transaction which can simply be plucked from a list on a monthly basis.
Exercise 43: Creating a Recurring Asset Transaction
1. Click on to display the Banking command centre
2. Click on Spend Money to display the Spend Money dialog box
Recurring transactions appear in lists and are very easy to use. With complex transactions that require careful allocation to accounts recurring transactions can save a great deal of time and significantly reduce errors.
Exercise 44: Using a Recurring Transaction
1. Ensure that the Banking command centre still appears
2. Click on Spend Money to display the Spend Money dialog box
3. Click on to display the Select a Recurring Transaction dialog box
4. Click on Turbogenerator Transactions and click on
The details will now appear in the Spend Money dialog box...
1. From the Accounts command centre, click on Accounts List, and click on the Asset tab
2. Create a new at-cost account for the asset – show the purchase price of the asset as an opening balance in this account
3. Create a new accumulated depreciation account for the asset
4. Click on the Liability tab
5. Create a new loan account for the asset – show the purchase price of the asset as an opening balance in this account to offset the asset at-cost account
To Make Loan Repayments:
1. From the Banking command centre, click on Spend Money
2. Enter the date, the amount of the repayment, and the finance company (or bank)
3. Enter payment details in the memo
4. Choose the loan liability account in Acct#
5. Click on [Record]
To Allocate Depreciation:
1. From the Accounts command centre, click on Record Journal Entry
2. Enter the date and the amount of the depreciation
3. Credit the accumulated depreciation asset account with the amount
4. Debit the expense depreciation account (e.g. 6-1300) with the amount
5. Click on [Record]
To Create A Combined Recurring Transaction:
1. From the Banking command centre, click on Spend Money
2. Enter the date, the amount of the repayment, and the finance company (or bank)
3. Enter payment details in the memo
4. Choose the loan liability account in Acct# and enter the loan repayment amount
5. Choose the accumulated depreciation asset account in the next Acct# line and enter the depreciation amount as a negative value
6. Choose the depreciation expense account in the next Acct# line and enter the depreciation amount
