Amortization Example for Prepaid Items
You can enter asset items in Vision for prepaid items, such as general liability insurance, that will be amortized when you run Depreciation Processing in the Asset Management application.
The following is an example of a prepaid asset item tracked in Vision using the Equipment Info Center and depreciated in Depreciation Processing.
Company A purchases a 12-month general liability insurance policy for $3,600.
The following table describes the entries that you make in Vision:
Step | Location | What You Must Complete | |||||||||
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1. | One-time setup: On the Item Categories tab, set up a purchasing item category to use only for prepaid items. This allows you to exclude prepaid items from asset item reports.
You must enter a category type of Capital Items for the item category. |
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2. | Enter and post an accounts payable voucher for $3,600 for the insurance policy that automatically creates the prepaid asset item for the insurance policy in the Equipment Info Center.
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3. | In the Equipment Info Center, enter and review depreciation information for the prepaid insurance asset item. | ||||||||||
3 a. | GL Cost tab in the Equipment Info Center | The $3,600 cost of the prepaid insurance policy that you entered for the AP voucher prefills in a row in the Acquisition Cost grid on the GL Cost tab.
Leave 100.00 in the Business Use Percentage field. Leave the Less Salvage Value field blank. |
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3 b. | GL Book tab in the Equipment Info Center | Complete the information on the GL Book tab, including the following:
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3 c. | Additional Books tab in the Equipment Info Center | If you set up any additional books to calculate depreciation or amortization differently from your general ledger book, entries from the GL Book tab prefill on the Additional Books tab for additional books. Change the prefilled information as needed, and enter additional amounts to affect the amortization basis. | |||||||||
4. | Run Depreciation Processing for your GL Book and additional books if you have them.
GL Book When you run depreciation processing for your general ledger book, the follow journal entries are created for your general ledger:
Additional Books If you have additional books and run depreciation for them, you can see the amortization that is calculated for the prepaid general liability insurance asset items on a transaction posting log (although no journal entries are created for additional books), in Asset Review in the Asset Management application, and on the Asset Detail report, an Equipment report in the Reporting application. |