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Fixed Asset Accounts Functionality [message #495697] Tue, 22 February 2011 01:10 Go to next message
tariqbashir
Messages: 4
Registered: November 2006
Location: Saudi Arabia
Junior Member

Hi Oracle Gurus

Kindly someone help me to explain the functionality / Defination for below Oracle Fixed Asset Accounts which is used in Fixed Asset Category Setup Screen and
Depreciation Rules (Prorate Convention).
.

Revaluation Reserve
Revaluation Amortization
CIP Cost
CIP Clearing

Depreciation Rules
Prorate Convention

Waiting for your Valuable Answers

Regards
Tariq
Re: Fixed Asset Accounts Functionality [message #501806 is a reply to message #495697] Thu, 31 March 2011 11:13 Go to previous message
hasan2000
Messages: 7
Registered: November 2007
Junior Member
Lets say, you purchased an asset in AP for $100.

DEBIT: ASSET CLEARING $100
CREDIT: PAYABLES $100

Asset Clearing is the account the temporarily holds the assets until it is added in FA.

You added the sset in FA. The life is 5 years and you will use straight line depreciation.

DEBIT: ASSET COST $100
CREDIT: ASSET CLEARING $100

Asset Cost is the account the stores the cost of the asset.

Following depreciation entry will be produced each year. (lets say you are using one period in the whole year, to simplify matter).

DEBIT: DEPRECIATION EXPENSE $100
CREDIT: ACCUMULATED DEPRECIATION $100

Depreciation Expense account tracks the usage of the asset per period.
Accumulated depreciation account tracks the total deprecitation that has taken place to-date.
Asset Cost - Accumulated Depreication = Book Value

In year 2, you revalued the asset at 10%. The asset is worth 10% more than the original cost. The inflation is obviously very high.

DEBIT: ASSET COST $10
CREDIT: REVALUATION RESERVE $10

You place the extra monetary value of the asset in the "revaluation reserve" account so that it could be amortized in coming periods.
You depreciate the asset cost and amortize the revlaution reserve. Almost same concept.


DEBIT: DEPRECIATION EXPENSE $100
CREDIT: ACCUMULATED DEPRECIATION $100 ($100 / 5 years)

DEBIT: REVALUATION RESERVE $10
DEBIT: REVALUATION AMORTIZATION $2.5 ($10 / 4 years)

Revaluation Amortization account reduces the reserve per period using the same depreciation method that reduces the asset cost.
The reduction of reserve is called amortization and reduction of asset cost is called depreciation.

Hope that helps.

For step by step Oracle Financials training please visit http://handsonerp.com

Regards

Oracle Financials Training - http://handsonerp.com
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