Asset Value Adjustment
The Asset Value Adjustment functionality in ERPNext provides organizations the facility to post sudden or unexpected value changes of an asset. It comes in handy in cases where an asset suffers physical damage, market devaluation, or impairment and its book value must be re-calculated at once to reflect its fair or recoverable value.
For example, if a company-owned laptop is badly damaged in an accident or hardware malfunction, its present market value can take a huge hit. Instead of continuing to depreciate it from the initial cost, you can employ Asset Value Adjustment to rescale the asset's valuation and bring it up to its new, lower (or higher) value.
To get to the Asset Value Adjustment, navigate to:
1. Prerequisites
Prior to creating and utilizing Asset Value Adjustment, make sure the following setup is complete:
- There should be an active record of Asset in the system.
- The Calculate Depreciation checkbox should be checked in the Asset form so that ERPNext can monitor the asset's value and depreciation schedule.
2. How to create an Asset Value Adjustment
In order to change the value of an asset:
- Go to the Asset Value Adjustment list and press New.
- Choose the Asset whose value adjustment will be posted.
- Select the Date when the value change was made.
- Input the Current Value and the New Adjusted Value of the asset.
- Optionally, select the suitable Cost Center and Finance Book for enhanced financial control.
- Save and Submit the document.
After saving, ERPNext will calculate the difference automatically and post the adjustment to the "Gain/Loss on Asset Revaluation" account. This posting will make sure that the variation in the value of the asset is accurately shown in the books of accounts.
On submission, a related Journal Entry is prepared to realign the book value of the asset. This journal entry will normally debit the Accumulated Depreciation and Asset Account, depending on whether it is a loss or gain.
ERPNext will automatically compute the difference after saving and record the adjustment in the post to the "Gain/Loss on Asset Revaluation" account. This posting will ensure that the difference in the value of the asset is recorded in the books of accounts.