Calculated Depreciation
In the Rental industry, there is a difference between the Fiscal Depreciation and the Calculated Depreciation.
Normally, the Calculated Depreciation is higher and it is needed to determine rental costs and a realistic asset value. It is used for mass rental and for renting items that are managed by serial number.
Calculation depreciation fields on rental items/machines
The Calc. Depreciation % and Calc. Depreciation Base fields are available on the:
- Rental Item Card
- Machine Type Card
- Machine Component Type Card
- Supplementary Part Type Card
The Calc. Depreciation % field specifies the percentage used to calculate a depreciation for an entire month of rental usage.
The Cal. Depreciation Base field refers to the value used as a basis for the calculated depreciation. It has two options:
- Unit Cost – normally used for mass rental items where no fixed asset is created.
- Book Value – the value from the Fixed Asset Card.
Note
If the Fixed Asset toggle is not turned on, the default is Unit Cost and cannot be changed.
Calculate cost of rental
When a rental contract invoice is posted, the cost of a rental by contract (calculated depreciation for the invoicing period) is automatically calculated.
Example
| Unit Price / Value of Asset | Calculated Depreciation % | Invoicing Period | Rental Start Date | Rental End Date | No. of Rate Units | Cost of Rental |
|---|---|---|---|---|---|---|
| 10000 | 5 | Month | May 15 | May 31 | 16 | 258.06 |
The starting date of an invoicing period is May 15th and the ending date is May 31st, which makes 16 Rate Units. The unit price of the rental item is 10000. So, the calculated costs of the rental contract for this invoicing period are 258.06 ((500/31) *16):
- 500 = 5% of the Unit Price or Book Value
- 31 = Days of the month (this value is defined in the Month Definition field in Rental Setup)
- 16 = No. of Rate Units
Posting the purchase order creates a Rental Ledger Entry for the depreciation for each rental invoicing period, evaluates all Rental Periods by month, and calculates the depreciation.
Example 1: Rental Period is one month
In this example, the Month Definition = Calendar Days in Rental Setup and the item is rented for a full month. The depreciation is applied for the whole month.
| Document No | Entry No | Bill-to-Customer | Item No | Quantity | Sales Document Type | Start Date | End Date | Due Date | Rental Position Type | Billing Unit | Rate Unit Price | Qty. of Billing Unit | Unit Price | Amount |
| REN-C-00122 | 1 | R-40000 | 1000 | 2 | Invoice | January 1 | January 31 | January 31 | Rental | DAYS | 100.00 | 31 | 3100.00 | 6200.00 |
| Unit Cost / Asset Value | Depreciation | Item No | Quantity | Document Type | Start Date | End Date | Position Type | Depreciation Cost | Qty. of Billing Units | Depreciation by Period | Amount | |||
| 10000 | 5% | 1000 | 2 | Depreciation | January 1 | January 31 | Depreciation | 500.00 | 31 | 500.00 | 1000.00 |
Example 2: Rental Period is less than one month
In this example, the Month Definition = 30 Days in Rental Setup and the item is rented for a 10 days. The depreciation is calculated as 500/30 Days * 10 Days = 166.67.
| Document No | Entry No | Bill-To-Customer | Item No | Quantity | Sales Document Type | Start Date | End Date | Due Date | Rental Position Type | Billing Unit | Rate Unit Price | Qty. of Billing Units | Unit Price | Amount |
| REN-C-00122 | 1 | R-40000 | 1000 | 2 | Invoice | January 1 | January 10 | January 31 | Rental | DAYS | 100.00 | 31 | 1000.00 | 2000.00 |
| Unit Cost / Asset Value | Depreciation | Item No | Quantity | Document Type | Start Date | End Date | Position Type | Depreciation Cost | Qty. of Billing Units | Depreciation by Period | Amount | |||
| 10000.00 | 5% | 1000 | 2 | Depreciation | January 1 | January 10 | Depreciation | 500.00 | 10 | 166.67 | 333.33 |
Example 3: Rental Period is more than one month
In this example, the Month Definition = 30 Days in Rental Setup and the item is rented for 46 days. The depreciation is calculated as 500/30 Days * 46 Days. The depreciation is calculated as 500+(500/30 Days * 16 Days) = 766.67.
| Document No | Entry No | Bill-To-Customer | Item No | Quantity | Sales Document Type | Start Date | End Date | Due Date | Rental Position Type | Billing Unit | Rate Unit Price | Qty. of Billing Units | Unit Price | Amount |
| REN-C-00122 | 1 | R-40000 | 1000 | 2 | Invoice | January 1 | February 15 | February 15 | Rental | DAYS | 100.00 | 46 | 4600.00 | 9200.00 |
| Unit Cost / Asset Value | Depreciation | Item No | Quantity | Document Type | Start Date | End Date | Position Type | Depreciation Cost | Qty. of Billing Units | Depreciation by Period | Amount | |||
| 10000.00 | 5% | 1000 | 2 | Depreciation | January 1 | January 10 | Depreciation | 500.00 | 46 | 766.67 | 1533.33 |
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