Depreciation, Inventory, Asset Management

Solutions for the Rental Industry

RCMS rental management software tracks two different user defined depreciation methods simultaneously for each asset in your rental inventory. The depreciation methods are chosen when setting up your Master Item records. Then, as assets are added, they use the default depreciation method setup in the Master Item record. You have the option of changing the depreciation methods on an item by item bases. Once the depreciation method has been selected and the 1st period calculated, the Asset Item depreciation methods can not be changed. This conforms to GAAP rules.

At the end of each month the user will run the "Calculate Depreciation" routine. This calculates one month of depreciation for each Asset Item and updates the depreciation fields for each record (fields listed below). The user also has the option to post depreciation journal entries to the GL.

For all depreciation methods listed below, RCMS calculates and maintains the following fields:

Depreciation Method
Depreciation Life
Date Depreciated Through
Year To Date Depreciation
Cumulative Depreciation
Salvage Value
Depreciated Value
Depreciation Basis

Straight Line Depreciation Method:
Straight Line Depreciation method is one of the most commonly used depreciation methods and is very simple to calculate. When choosing this depreciation method you are asked for the Depreciation Life in months) and the Salvage Value.

Double Declining Balance Depreciation Method:
The double declining balance depreciation method is like the straight-line method on steroids. To use it, accountants first calculate depreciation as if they were using the straight line method. They then figure out the total percentage of the asset that is depreciated the first year and double it. Each subsequent year, that same percentage is multiplied by the remaining balance to be depreciated. At some point, the value will be lower than the straight-line charge, at which point, the double declining method will be scrapped and straight line used for the remainder of the asset’s life. Generally Accepted Accounting Practices (GAAP) and tax law may dictate whether one of these lives should be used. You may want to discuss using these asset lives with your CPA.

Sum-of-the-Years - Digits & Depreciation Method:
The Sum-of-the-Years'-Digits Method is an accelerated method of depreciation that provides higher depreciation expense in the early years and lower depreciation expense in later years. To calculate the Sum-of-the-Years'-digits, the digit of each year is progressively numbered and then summed up. For example, the sum of the years digits would be:

For five years = 5+4+3+2+1=15

For four years = 4+3+2+1=10

For three years = 3+2+1=6

When dealing with an asset with a long life, it is helpful to use the general formula for finding the sum of the years" digits, S, where N is the number of years in the assets" life. S=N* ((N+1)/2) To find the sum of the years" digits for an asset with a 50-year life: S=50* ((50+1)/2)=1275 The sum of the years" digits becomes the denominator, and the digit of the highest year becomes the first numerator. In the first example, the first year's depreciation for a five-year life would be 5/15 of the depreciable base of the asset, the second years depreciation would be 4/15 and so on.

<<< Previous Feature page | Next Feature page >>>

Products : Services : Support
Home : About : Contact : Sitemap