Enhance Your Accounting and Tax Processes with our Cycle Sale for Accounting and Tax

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welcome to another video in the acps for Hana fixed assets playlist fixed assets retirement scrapping write-off and sale all use the same process in saps for Hana in the video today I will explain the different business cases and the financial entries included let's take an example in 0 1 0 and 2020 we purchased an asset for the value of 40 000. this asset has a useful life of four years so it should be over by 31st 12 2023. when posting the fixed acquisition the financial entry is a debit to fixed assets and accurate it to the supplier accounts payable or cash then over the useful life of the asset every period we post the fixed asset depreciation and if the accounting entry is a debit to the depreciation expense and accredited to accumulated depreciation the fixed asset acquisition value is displayed in our balance sheet under assets in a positive value and accumulated depreciation is also displayed under assets but with a negative value and the balance is the netbook value of the asset at the end of the useful life in 31st December 2023 the asset is fully depreciated and the network value of the asset is zero because the acquisition value is equal to the accumulated depreciation but we can still see this it in our books and it would remain there in our balance sheet we can see it in the acquisition value and then the in the accumulated depreciation now we want to throw out this asset because it's no longer useful and we want to write it off from our box how can we do this this is our first business case which is a full write-off or a full retirement of an asset that is fully depreciated here we are going to post the write-off and the accounting entry will be a debit to the accumulated depreciation and accredited to the fixed acquisition value and since these two are equal the financial entry is balanced and we don't have any other accounts in this entry the second business case is exactly the same but instead of throwing out the asset for free we are going to sell it as a scrap so for the same fully depreciated asset in 31st December 2023 we are going to sell it as a scrap and we are going to receive some Revenue let's say we sold the scrap for 500 USD here the financial entry will be first a debit to accumulated depreciation for 40 000 and decorated two fixed assets for 40 000 because we have to write off the asset from our balance sheet then we have a debit to cash or bank transfer or customer account for 500 this is the amount we are going to receive for the sale and accredited to a revenue or again account for 500 USD so this is our second business case and we can call it fixed asset disposal against Revenue right of against Revenue sale against revenue or retirement against Revenue there are all the same thing and when we do the fixed asset sale it can either happen directly in finance so we post all the transactions and finance directly without any sales order or it can happen with collaboration with our sales colleagues and we are going to create a sales order then post Goods issue then post billing it will follow the same order to cash process that I explained before I will also show you both of these cases in the s4hana demo now let's move to our third business case in first of January 2021 after one full year of depreciation of the asset we decided to scrap it completely without any Revenue so for any reason we decided to write it off from our books maybe there has been an accident and the EST is completely destroyed or the asset is not useful to us for any reason and we are going to throw it out and write it off from our box without receiving any Revenue here the financial entry will be again that we write off the asset in the beginning so we will have a debit to the accumulated depreciation but this time the accumulated depreciation is not 40 000 because we are still in first of January 2021 so we only have one year of depreciation so the accumulated depreciation is only four ten thousand so here we will have a debit to accumulated depreciation for ten thousand accredited to the fixed asset for 40 000 and as you see this time we have a balance because the asset is not fully depreciated so the difference between these two is a loss because now the asset still has a netbook value of thirty thousand and we are going to throw it out so we lost 30 000 USD so here we will have a debit to a lost account for thirty thousand the fourth business case is if we do exactly the same in first of January 2021 but instead of throwing it out for free we are actually selling it to a customer and when we sell it to the customer we can either sell it for again or we sell it for alos so let's say in first of January 2021 we decided to sell the asset for 35 USD here the financial entry will be a debit to accumulated depreciation for ten thousand accredited to the asset account for 40 000 so we wrote off the asset from our balance sheet and then we will have a debit to the customer accounts receivable for 35 000 and the difference is a credit to gain account for five thousand because we sold the asset for 35 000 while the netbook value was only thirty thousand so we gained 5000 USD so the difference is posted to again account the other possibility in this business case is that we sell the asset for a loss so let's say we sold the asset in first of January 2021 for the value of 25 000 so this is less than the network value of the asset at this time here the financial entry will be a debit to accumulated depreciation for 10 000 accredited to the asset for 40 000 and then we have a debit to the customer accounts receivable for 25 000 and the difference is a debit to loss for 5000 because we lost 5000 which is the difference between the netbook value of the asset and the amount that we received from the customer and these are all the business cases for full fixed asset retirement or sale or disposal or write-off which means we fully write off the asset from our box the same business cases exist for partial asset retirement so instead of fully writing off the asset from our books we want to write off only a part of the asset for example let's say we have a production line and we created all of the production line as one fixed asset but then we are going to sell a part of the production line so we want to partially sell an asset or maybe the asset that we had had a small accident and a part of it is destroyed and we want to write off a part of the acquisition value of the asset or for any reason maybe we actually when we posted the EST acquisition we posted an extra value by mistake so the asset was for 30 000 but we posted an acquisition for 40 000 by mistake and then now we want to write off the 10 000 difference all of this is the same this is partial retirement or partial asset disposal or partial write-off or partial sale so these are exactly the same business cases as the others but for a part of the asset and the accounting entries will also be the same but with different values because we are only returning a part of the asset not all of it so let's say for example that we have the asset on zero one zero one two thousand twenty one so first of January after one full year of depreciation and we want to write off 25 of the value of the asset without any Revenue without any returns so here it will be a partial asset retirement without Revenue the financial entry will be a debit to the accumulated depreciation here the value will be 10 000 which is the accurated depreciation value multiplied by 25 percent this is the amount we are retiring so the value will be 2500 in a community depreciation and accredited to the fixed asset acquisition value and instead of 40 000 it will be forty thousand multiplied by 25 percent which is ten thousand so we have accredited two assets for ten thousand and the difference will also go to a lost account so we have the difference 7500 and debit posted two loss the same applies to all the other business cases I explained they will use the same accounting entries but with different values based on the percentage we are returning from the asset and also instead of using a percentage we can use a value so for example instead of saying we want to retire 25 of the asset we can say we want to retire 5000 of the asset both of these will work for sap a very important note when it comes to these accounting entries on sap s4hana is is that scep will post two different accounting entries for the asset sale so when we sell an asset we will have one entry with a debit to the customer accounts receivable and accredited to the asset sales account and then we have another entry that will write off the asset with the debit to the asset the accumulated depreciation credit to the asset value and the difference either to again or lose account which means that in sap we have to use an additional intermediary creating accounts in these accounting entries I will show you all of this when I demonstrate the process on saps for Hana in the next videos in this playlist I will demonstrate all of these cases and the accounting entries on sap S100 2021. there are some videos that will only be available to the channel members you can find them in the playlist and if you would like to watch them then check the channel membership program thank you for watching and I'll see you again soon