The Asset Capitalization feature enables you to:

• Transform one or multiple stock items into a new composite asset.
• Transform one or multiple stock items into a new composite asset and incorporate the cost of service expenses.
• Convert one or multiple assets into a new composite asset.
• Convert one or multiple assets into a new stock item.

To access the Asset Capitalization feature, go to:

Home > Assets > Maintenance > Asset Capitalization

Let’s go through the aforementioned use cases one by one.

1. Convert one or more stock items into a new composite asset

Steps:

• To create a new Asset Capitalization:
  1. Select the Capitalization Method as “Create a new composite asset” if you want a new composite Asset to be generated. Set the Target Item Code to the fixed asset Item to be associated with the new asset, and the Target Asset Location to the Location of the new asset. Alternatively, if you prefer to use a Work in Progress (WIP) composite asset, opt for the Capitalization Method as “Choose a WIP composite asset” and specify the Target Asset as the composite asset.
  2. Adjust the Naming Series, Company, Finance Book, and Posting Date as necessary.
  3. Specify the stock items to be converted in Consumed Stock Items. If you’ve selected the Capitalization Method as “Choose a WIP composite asset,” all the items linked to the asset through Purchase Receipts/Invoices will be automatically retrieved.
  4. Save and Submit the changes.
  5. Set the depreciation details (if applicable) of the newly created asset and submit it.

Accounting effect:

The selected quantity of Consumed Stock Items will be deducted from the chosen warehouses, and the Warehouse Stock Accounts will be credited with the value of the issued stock. Simultaneously, the Fixed Asset account of the newly created Asset will be debited with the Total Value.

2. Convert one or more stock items into a new composite asset and capitalize the service expenses’ cost

The prerequisites, steps, and accounting effects for this process are almost identical to the previous one, with the addition that you can include Service Expenses. The Expense Accounts associated with the services will be credited with the respective service amounts.

3. Convert one or more assets into a new composite asset

Prerequisites:

A new fixed asset Item (with Is Fixed Asset checkbox ticked) since it would be the item linked with the new asset.

Steps:

• Create a new Asset Capitalization
• Set the Target Item Code to the Item to be linked with the new asset
• Set the Target Asset Location to the Location of the new asset
• Change the Naming Series, Company, Finance Book and Posting Date if needed
• Enter the assets to be converted in Consumed Assets
• Save and Submit
• Set the depreciation details (if any) of the newly created asset and submit it.

Accounting effect:

The assets consumed will undergo depreciation (if depreciation is configured) until the posting date, and Depreciation Journal Entries will be generated accordingly. Subsequently, they will be disposed of, and their status will be changed to “Capitalized.” The Fixed Asset accounts of the consumed assets will be credited with their gross purchase amount, while the Accumulated Depreciation accounts will be debited by their total accumulated depreciation. Meanwhile, the Fixed Asset account of the newly created asset will be debited by the Total Value.

4. Convert one or more assets into a new stock item

Prerequisites:

A new stock Item (with Maintain Stock checkbox ticked) to which the

Steps:

• Create a new Asset Capitalization
• Set Entry Type to Decapitalization
• Set the Target Item Code to the new Item
• Set the Target Warehouse and Target Qty
• Change the Naming Series, Company, Finance Book and Posting Date if needed
• Enter the assets to be converted in Consumed Assets
• Save and Submit
• Set the depreciation details (if any) of the newly created asset and submit it.

Accounting effect:

The assets consumed will undergo depreciation (if depreciation is configured) until the posting date, and Depreciation Journal Entries will be generated accordingly. Subsequently, they will be disposed of, and their status will be changed to “Decapitalized.” The Fixed Asset accounts of the consumed assets will be credited with their gross purchase amount, while the Accumulated Depreciation accounts will be debited by their total accumulated depreciation. The new stock item will be added in the Target Warehouse by the Target Quantity, and the Target Warehouse Account will be debited by the Total Value.