How to: Set Up Tax Depreciation

  • Article

To set up tax depreciation in accordance with the Income Tax Act, you must set up the depreciation book, the fixed asset, and the accounting period. To set up depreciation in accordance with the Companies Act, you must set up the depreciation book and the fixed asset.

The following procedure describes how to set up the depreciation book in accordance with the Income Tax Act, but the same steps also apply to setting up the depreciation book in accordance with the Companies Act.

To set up depreciation in accordance with the Income Tax Act

  1. In the Search box, enter Depreciation Books, and then choose the related link.

  2. On the Home tab, choose New.

  3. In the Depreciation Book Card window, on the General FastTab, fill in the required fields as described in the following table.

    Field Description

    Code

    The unique depreciation book code. You can enter a maximum of 10 alphanumeric characters.

    Description

    The description for the depreciation book.

    FA Book Type

    Specify Income Tax to indicate the fixed asset book type.

    Depr. Threshold Days

    The number of days for the depreciation threshold.

    Depr. Reduction %

    The depreciation reduction rate.

    Use FA Ledger Check

    Select to indicate that the fixed asset ledger will be checked before the journal line is posted.

    Use Rounding in Periodic Depr.

    Select to round the periodic depreciation amounts to whole numbers.

    Use Same FA+G/L Posting Dates

    Select to specify that the posting date and the fixed asset posting date must be the same before you can post the journal line.

    Allow Changes in Depr. Fields

    Select to modify the depreciation fields.

  4. Choose the OK button.

The following procedure describes how to set up accounting periods in accordance with the Income Tax Act, but the same steps also apply to setting up accounting periods in accordance with the Companies Act.

To set up accounting periods in accordance with the Income Tax Act

  1. In the Search box, enter Accounting Periods, and then choose the related link.

  2. On the Home tab, choose New.

  3. In the Accounting Periods window, on the Actions tab, in the General group, choose Create Year.

  4. In the Create Fiscal Year batch job, on the Options FastTab, fill in the fields as described in the following table.

    Field Description

    Starting Date

    The starting date of the fiscal year.

    No. of Periods

    The number of accounting periods into which the fiscal year will be divided.

    Period Length

    The length of the accounting period.

  5. Choose the OK button.

The following procedure describes how to set up fixed assets in accordance with Income Tax Act, but the same steps also apply to setting up fixed assets in accordance with the Companies Act.

To set up fixed assets in accordance with the Income Tax Act

  1. In the Search box, enter Fixed Assets, and then choose the related link.

  2. On the Home tab, choose New.

  3. In the Fixed Asset Card window, on the General FastTab, fill in the required fields as described in the following table.

    Field Description

    No.

    The number of the fixed asset.

    Description

    The description of the fixed asset.

  4. On the Lines FastTab, fill in the required fields as described in the following table.

    Field Description

    Depreciation Book Code

    The depreciation book code that is assigned to the fixed asset. The FA Book Type field must already be set to Income Tax in the Depreciation Book Card window. For more information, see Depreciation Book Card Window.

    FA Posting Group

    The fixed asset posting group that you use when posting entries.

    Depreciation Method

    The depreciation method to calculate the depreciation.

    Depreciation Starting Date

    The starting date of the depreciation.

    Depreciation Ending Date

    The ending date of the depreciation.

  5. On the Posting FastTab, fill in the required fields as described in the following table.

    Field Description

    FA Class Code

    The class code of the fixed asset.

    FA Subclass Code

    The subclass code of the fixed asset.

    FA Location Code

    The location code of the fixed asset.

    FA Block Code

    The block code of the fixed asset.

  6. On the Navigate tab, in the Depr. Book group, choose Shifts.

  7. In the FA Shifts window, in the Straight-Line % field, enter the straight-line percentage to depreciate the fixed asset.

    Note

    For setting up fixed assets in accordance with the Companies Act, define the shift for the fixed asset if the company is working multiple shifts.

  8. Choose the OK button.

    Note

    The book value will be updated after you acquire the fixed asset through either the general journal, purchase order, or purchase invoice. For more information, see General Journal Window, Purchase Order Window, and Purchase Invoice Window.

See Also

Tasks

How to: Calculate Depreciation
How to: Calculate Retrospective Depreciation

Reference

FA Shifts
FA Shift

Concepts

Tax Depreciation

Other Resources

Depreciation Book Card Window
Fixed Asset Card Window
Accounting Periods Window
General Journal Window
Purchase Order Window
Purchase Invoice Window