Capital Assets

1
Capital Assets
2
Approaches

• Full Fund Accounting Capital
• Capital Asset transactions recorded in Fund 20
  (Plant Fund)
• Operating and Plant Funds are recorded separately
• Combined Fund Accounting
• Capital Asset transactions combined with other
  funds in Fund 10 (Operating Fund)

3
Payment For Assets andAsset Acquired Accounts

• Full Fund Accounting
• Asset is purchased and funded by Operating Fund
• Due To / From Plant Fund transaction is debited
  in the Operating Fund as a receivable from Plant
  Fund.
• This transaction is counter-recorded in the Plant
  Fund as a payable to the Operating Fund and a
  debit to the Payment for Asset natural account
• Tag with Function Dimension
• Restriction Dimension non-tithe

4

• When the asset is debited in the Asset Control
  account in the Plant Fund, the Asset Acquired
  account is credited to reflect the entry in the
  other side of the equation.

5
Due To / From vs Transfer To / From

• Why use Due To / From account to channel funds
  between Operating and Plant Fund?
• Provides easy monitoring / checking of
  transactions between funds
• To ensure what is entered in Operating Fund is
  counter-entered in Plant Fund
• Running balance of Due To / From account should
  be 0.
• If this account has a balance, the entry to the
  other fund has not been made.

6

• Gives net account payable / receivable between
  funds within a fiscal year.
• Can be an indicator of the amount invested in the
  Plant Fund
• Can alert management when expenditures are over
  or below budget
• End of each fiscal year if Due To / From balance
  should be funded by Operating Fund, a Committee
  action could move this to the Transfer Account,
  using Non-tithe Fund to fund the transfer.
• Due To / From ensures that Tithe Fund is not used
  in transferring funds to Plant Fund.

7
Payment For Assets andAsset Acquired Accounts

• Combined Fund Accounting
• Debit Payment for Asset natural account
• Tag with Function Dimension
• Tag with non-tithe Restriction Dimension
• Credit either Cash / Bank or Accounts Payable
• When asset is debited to Asset Control account,
  the Asset Acquired account is credited as the
  other side of the entry.
• Both sets of entries involving Payment for Assets
  and Assets Acquired accounts must be tagged with
  Fund 10 (Operating Fund)

8
Full Fund AccountingNOI and NOU Functions

• Transactions entered in Plant Fund PL account
  must be tagged with Function
• NOI Non-Operating Investment in Plant Fund, or
• NOU Non-Operating Unexpended Plant Fund
• End of fiscal year balances in NOI and NOU
  functions must be closed via Transfer Between
  Functions natural account to
• UFIN Unallocated Fund Investment in Plant Fund
  and
• UFUN Unallocated Fund Unexpended in Plant Fund

9
Combined Fund AccountingNOI and NOU Functions

• End of fiscal year
• NOI Function is closed to AFC Property Allocated
  Fund
• NOU Function is closed to UFNT Unallocated
  Non-tithe Fund

10
Capital Asset Register

• The first step when dealing with assets using
  either approach is to record the asset details in
  the Asset Register.
• This guarantees automatic calculation of
  depreciation.

11
Capital Asset PurchasesRecording Entries
12
Full Fund Accounting

• If
• Plant Fund has no bank account and
• Purchase of Capital Asset is funded by Operating
  Fund

13

• Entry in the Operating Fund
• DR 191110 Due to / From / Fund 10
• CR 102XXX Bank Account / Fund 10
• To record the receivable from Fund 20 by the use
  of money from Fund 10
• Entry in the Unexpended Function in the Plant
  Fund
• DR 962110 Payments for Assets
• Fund 20 / FNCT NOUXXX / RSTR 01 CR 191110
  Due To / From / Fund 20
• To record the use of Fund in Fund 20, and
  establish it as payable to Fund 10, and to record
  the use of the non-tithe restriction

14

• Entry in the Invested Function in the Plant Fund
• DR 20X20X Capital Assets / Fund 20
• CR 77110 Asset Acquired / Fund 20 /
• FNCT NOIXXX / RSTR 01
• To record the actual purchase of a Capital Asset,
  the addition of fund in the Invested Function,
  and increase of the non-tithe Restriction

15

• If
• Plant Fund has a bank account and
• Purchase of Capital Asset is funded by the Plant
  Fund

16

• Entry in the Unexpended Function
• DR 962110 Payment for Assets / Fund 20 /
• Fnct NOUXXX / RSTR 01
• CR 102XXX Bank Account / Fund 20
• To record the bank transaction and the use of
  Unexpended Function and non-tithe Restriction in
  the Plant Fund.
• Entry in the Invested Function
• DR 20X20X Capital Assets / Fund 20
• CR 773110 Asset Acquired / Fund 20 /
• Fnct NOIXXX / RSTR 01
• To record the actual purchase of the Capital
  Asset, the addition of fund in the Invested
  Function, and non-tithe Restriction in the Plant
  Fund.

17

• End of fiscal year transfer entries
• Close the various Functions balances to the
  Unallocated Fund

18

• Entry for the Unexpended Property Function
• DR 995110 Trs Btw Fnct / Fund 20 / Fnct UFUN
• RSTR 01 / TFWW NOUXXX
• CR 995110 Trs Btw Fnct / Fund 20 /
• Fnct NOUXXX / RSTR 01 / TFWW UFUN
• To close the NOUXXX Function to Unallocated Fund
  Unexpended Function.
• Entry for the Invested in Property Function
• DR 995110 Trs Btw Fnct / Fund 20 / Fnct NOIXXX
• RSTR 01 / TFWW UFIN
• CR 995110 Trs Btw Fnct / Fund 20 / Fnct UFIN
• RSTR 01 / TFWW NOIXXX
• To close the NOIXXX Function to Unallocated Fund
  Invested Function

19
Combined Fund Accounting

• To record Asset Purchases
• DR 962110 Payment for Assets / Fund 10 /
• Fnct NOUXXX / RSTR 01
• CR 102XXX Bank Account / Fund 10
• To record the Bank payment, the use of
  Unexpended Function, and non-tithe Restriction.
• DR 20X20X Assets / Fund 10
• CR 773110 Asset Acquired / Fund 10 /
• Fnct NOIXXX / RSTR 01
• To record actual purchases of Capital Asset, the
  addition of fund in Invested Function, and
  non-tithe Restriction.

20

• To close various Asset Transaction Functions at
  the end of fiscal year DR 995110 Trs Btw Fnct
  / Fund 10 / Fnct UFNT
• RSTR 01 / TFWW NOUXXX
• CR 995110 Trs Btw Fnct / Fund 10 /
• Fnct NOUXXX / RSTR 01 / TFWW UFNT
• To close the NOUXXX Function to Unallocated Fund
  Non-tithe.
• DR 995110 Trs Btw Fnct / Fund 10 /
• Fnct NOIXXX
• RSTR 01 / TFWW AFC Prop
• CR 995110 Trs Btw Fnct / Fund 10 /
• Fnct AFC Prop Alloc / RSTR 01 /
• TFWW NOIXXX
• To close NOIXXX Function to Allocated Fund
  Capital Function.

21
Note

• SunPlus strongly suggests separation of the net
  Capital Assets Value from the Operating Fund
  Unallocated net assets.
• Open an Allocated Fund for Property function
• This fund should be named AFC Plant Fund
• End of fiscal year Close or transfer
  Depreciation Expenses charged to NOIXXX function
  and other functions in relation to Capital Assets
  to AFC Property Allocated Fund function
• At all times, the net value of Capital Assets
  should equal the balance of the AFC Property
  Allocated Fund.

22
Capital AssetsDepreciation Entries
23
Approaches

• Full Fund Accounting Depreciation Expense
  Recording
• Depreciation Expenses are recorded in Plant Fund
  (Fund 20)
• Combined Fund Accounting Depreciation Expense
  Recording
• Depreciation Expenses are recorded in Operating
  Fund (Fund 10)

24
Full Fund Accounting

• This is the standard approach to recording
  Capital Assets and Depreciation Expenses in the
  Capital Asset Register.
• Depreciation Expense can be funded by either Fund
  20 or Fund 10.

25

• Depreciation Expense recorded in Fund 20 and
  Funded by Fund 20 (Investment in Plant Fund)
• Define Asset details in Asset Register
• Depreciation calculation is automatic
• Define natural accounts in Asset Register
• 209XXX Allowance for Depreciation
• 903XXX Depreciation Expense
• SunPlus automatically debits 903XXX and credits
  209XXX every time depreciation is calculated
• Define Fund, Function, and Restriction Codes as
  Mandatory for the Depreciation Expense account
• Define Asset Posting Preset for each asset.
• Fund 20
• Function NOIXXX
• Restriction 01

26

• Depreciation Expense recorded in Fund 20
  (Investment in Plant Fund) but funded by Fund 10
  (Operating Fund)
• Define Asset details in the Asset Register
• Depreciation calculation is automatic
• Define natural accounts in Asset Register
• 209XXX Allowance for Depreciation
• 903XXX Depreciation Expense
• SunPlus will automatically debit 903XXX and
  credit 209XXX every time Depreciation is
  calculated
• Define Fund, Function, and Restriction Codes as
  Mandatory for the Depreciation Expense natural
  account
• Define Asset Posting Preset for each Asset.
• Fund 20
• Function NOIXXX
• Restriction 01

27

• After
• Depreciation Expense has been calculated and
  recorded and
• Depreciation Expense amount to be funded by
  Operating Fund has been determined,
• Make a transfer between funds entry
• DR 997110 Trs Btw Funds / Fund 10 /
• Fnct UFNT / RSTR 01 / TFWW Fund 20
• CR 191110 Due To / From / Fund 10
• To record the funding of Depreciation Expense by
  the Operating Fund.
• DR 191110 Due To / From / Fund 20
• CR 997110 Trs Btw Funds / Fund 20 / Fnct
  UFUN RSTR 01 / TFWW Fund 10
• To record the transfer of fund from Operating
  Fund to Plant Fund Unexpended Function in the
  Plant Fund.

28

• Depreciation recorded in Fund 20, funded by Fund
  10, and reflected in Fund 10 Functions
• Define Asset details in the Asset Register
• Depreciation calculation is automatic
• Define natural accounts in Asset Register
• 209XXX Allowance for Depreciation
• 903XXX Depreciation Expense
• SunPlus will automatically debit 903XXX and
  credit 209XXX every time Depreciation is
  calculated
• Define Fund, Function, and Restriction Codes as
  Mandatory for the Depreciation Expense natural
  account
• Define Asset Posting Preset for each Asset.
• Fund 10 for both Allowance for Depreciation and
  Depreciation Expense
• Function codes for the Functions / Departments
  using the assets
• Restriction 01

29

• To move back the recording of Allowance for
  Depreciation to Fund 20 (as automatic
  depreciation calculation has entered them in Fund
  10 as per definition), the following entries are
  made

30

• Entry in the Operating Fund
• DR Allowance for Depre Clearing / Fund 10
• CR 997110 Trs Btw Fund / Fund 10 / Fnct UFNT
• RSTR 01
• To clear Allowance for Depreciation
  automatically entered in Fund 10 by the system
  during the automatic Depreciation Run, and
  transfer the allowance to the Plant Fund.
• DR 997110 Trs Btw Fund / Fund 10 / Fnct UFNT
• RSTR 01
• CR 191110 Due To / From / Fund 10
• To record in the Operating Fund the entry to
  fund the depreciation expense in the Plant
  Fund.

31

• Entry in Plant Fund Unexpended Function
• DR 191110 Due To / From / Fund 20
• CR 997100 Trs Btw Funds / Fund 20 /
• Fnct NOUXXX / TFWW Fund 10
• To receive the transfer of fund from Operating
  Fund to Plant Fund Unexpended Function.
• Enter in the Invested in Plant Fund Function
• DR 997110 Trs Btw Fund / Fund 20 / Fnct NOIXXX
• TFWW Fund 10
• CR Allow for Depreciation / Fund 20
• To record the actual Allowance for Depreciation
  in the Plant Fund.

32
Combined Fund Accounting

• Fund 10 (Operating Fund) is the only fund defined
  in the system.
• Both Capital Assets and Expenses are recorded in
  Fund 10.

33
Approaches

• Combined Function Recording
• Detailed Function Recording

34
Combined Function Depreciation Expense Recording

• Even if Capital Assets are recorded in Fund 10
  (Operating Fund), Depreciation Expense will be
  recorded using Fund 20 (Plant Fund) Functions
• Define Asset details in the Asset Register
• SunPlus will automatically calculate Depreciation
• Define natural accounts in the Asset Register
• 209xxx Allowance for Depreciation
• 903xxx Depreciation Expense
• SunPlus will automatically debit Depreciation
  Expense and credit Allowance for Depreciation
  every time depreciation is calculated
• Define Fund, Function, and Restriction codes as
  Mandatory in the Depreciation Expense account

35

• Define Asset Posting Preset for each asset in the
  Asset Register
• Fund 10
• Function NOIXXX
• Restriction 01
• End of fiscal year, transfer the balance of the
  various Functions to the AFC Property Allocated
  Fund
• DR 995100 Trs Btw Fnct / Fund 10
• AFC Property Fnct / RSTR 01 /
• TFWW NOIXXX
• CR 995100 Trs Btw Fnct / Fund 10 /
• Fnct NOIXXX / RSTR 01 / TFWW AFC Prop

36
Detailed Function Depreciation Expense Recording

• Depreciation Expense is recorded in each Function
  in the Operating Fund that is using the Asset
• Define Asset details in the Asset Register
• SunPlus will automatically calculate Depreciation
• Define natural accounts in the Asset Register
• 209xxx Allowance for Depreciation
• 903xxx Depreciation Expense
• SunPlus will automatically debit Depreciation
  Expense and credit Allowance for Depreciation
  every time depreciation is calculated
• Define Fund, Function, and Restriction codes as
  Mandatory in the Depreciation Expense account

37

• Define Asset Posting Preset for each asset in the
  Asset Register
• Fund 10
• Function Code for the Operating Fund Function
  to which the asset is assigned (General Function
  code must be charged for expenses not directly
  absorbed by the departments)
• Restriction 01
• End of fiscal year, transfer the total
  Depreciation expense from Unallocated Non-tithe
  to Allocated Fund Capital Property to maintain
  the balance of the net Capital Assets and the AFC
  Property Allocated Fund
• DR 995110 Trs Btw Fnct / Fund 10
• AFC Property Fnct / RSTR 01 /
• TFWW UFNT
• CR 995110 Trs Btw Fnct / Fund 10 Fnct UFNT /
  RSTR 01 / TFWW AFC Prop

38
Funded Depreciation Entries
39
What is Funded Depreciation?

• An accounting practice that ensures funds are
  always available for future replacement assets
• Especially valuable for fully depreciated plant
  assets
• Funded Depreciation sets aside funds equivalent
  to the Depreciation expense of a particular
  asset.
• Setting aside funds in Allocated Fund records
• Establishing a bank account to back up the
  Allocated Fund.

40

• When the budget is drawn, Depreciation expense is
  part of the budgeted operating expenses.
• Most of budgeted income is cash generated.
• Since Depreciation Expense is a non-cash
  generated expense
• cash equivalent to the Depreciation Expense must
  be set aside
• so cash is available for the Allocated Fund which
  is set aside to fund Depreciation for future
  asset replacement.

41

• Best way to fund Depreciation
• Set up a Capital Allocated Fund
• Open a specific bank account to hold the actual
  figure representing the Depreciation Expense for
  the fiscal year
• This will not affect the organizations cash flow.

42
Entries for Funded Depreciation

• Determine Depreciation Expense for the year.
• If
• Full Fund Accounting is used and
• There is no bank account in the Plant Fund and
• Capital Allocated Fund is recorded in the Plant
  Fund

43

• Entry in the Operating Fund
• DR 102XXX Bank Account for the Funded
  Depreciation / Fund 10
• CR 102XXX Regular Bank Account / Fund 10
• To move funds from regular bank account to Funded
  Depreciation bank account (this may be a fund
  transfer or a deposit).
• DR 997110 Trs Btw Fund / Fund 10 / Fnct UFNT /
  
• RSTR 01 / TFWW 20
• CR 191110 Due To / From / Fund 10
• To record a payable in the Operating Fund for
  setting up the Funded Depreciation bank
  account.

44

• Entry in the Plant Fund
• DR 191110 Due To / From / Fund 20
• CR 997110 Trs Btw Fund / Fund 20 / Fnct UFUN /
  RSTR 01 / TFWW 10
• To record a receivable in Fund 20 for the funded
  Depreciation Bank that is set up in the Operating
  Fund.
• DR 995110 Trs Btw Fnct / Fund 20 / Fnct UFUN /
  RSTR 01 / TFWW AFC Fund Dep
• CR 995110 Trs Btw Fnct / Fund 20 /
• Fnct AFC Fnd Dept / RSTR 01 /
• TFWW UFUN
• To record Depreciation Expense amount in the AFC
  Funded Depreciation Fund.

45

• If
• Full Fund Accounting is used and
• There is no bank account in the Plant Fund and
• Capital Allocated Fund is recorded in the
  Operating Fund
• DR 102XXX Bank Account for Funded Depreciation
  /
• Fund 10
• CR 102XXX Regular Bank Account / Fund 10
• To move fund from regular bank account to the
  Funded Depreciation account (this may be a fund
  transfer or a deposit).
• DR 995110 Trs Btw Fnct / Fund 10 / Fnct UFNT /
  RSTR 01 / TFWW AFC Fund Dep
• CR 995110 Trs Btw Fnct / Fund 10 / Fnct AFC
  Funded Depr / RSTR 01 / TFWW UFNT
• To record Depreciation expense amount in the
  AFC Funded Depreciation to fund this Allocated
  Fund.

46

• If Combined Operating Fund is used
• DR 102XXX Bank Account for Funded Depreciat
  ion / Fund 10
• CR 102XXX Regular Bank Account / Fund 10
• To move funds form regular bank account to the
  Funded Depreciation account (this may be a fund
  transfer or a deposit.).
• DR 995110 Trs Btw Fnct / Fund 10 / Fnct UFNT /
  RSTR 01 / TFWW AFC Fnd Dp
• CR 995110 Trs Btw Fnct / Fund 10 / Fnct AFC
  Funded Dept / RSTR 01 / TFWW UFNT
• To record Depreciation expense amount in the
  AFC Funded Depreciation to fund this Allocated
  Fund.

47
Capital Assets SetupBalances Migration Procedure
48
Introduction

• Capital Asset Migration occurs during SunPlus
  implementation.
• This stand alone procedure can be performed
  before, during, or after implementation.
• This procedure can speed up the process.

49
Preparation Phase

• Asset Register
• Fully populate
• Start Period of Depreciation
• Estimated Life
• Gross value
• Accumulated Depreciation
• Reconcile Start Period information with the
  amount in Accumulated Depreciation

50

• Example
• Building Gross Value 150,000
• Accumulated Depreciation 55,000
• Estimated Life 30 Years
• Start Period of Depreciation 02 / 97
• Implementation Period 01 / 07
• In reconciling this example depreciation with
  start period
• Determine monthly depreciation
• Monthly depreciation Gross Value / Estimated
  Life
• 150,000 / 30 yrs 5,000

51

• Determine how many years and months accumulated
  depreciation amount represents
• Accumulated Depreciation in years / months
  Accumulated Depreciation / Monthly Depreciation
• 55,000 / 5,000 10 years
• Determine Asset Existence
• The number of years and months the asset has
  already existed and depreciated by using the
  start period and last period before the
  implementation period
• Asset Existence Period before implementation
  Start Period of Depreciation
• 12 / 06 02 /97 9 years and 11 months
• Compare the number of years the asset has been
  depreciated with the existence of the asset
• 10 years 9 years and 11 months 1 month
• In other words, the asset has been over
  depreciated for one month based on the start
  period of depreciation
• Adjust the start period in the start period
  column of the Asset Register from 02 / 97 to 01 /
  97

52
Upload Procedure

• 2 approaches
• Pre-Audit
• Post Audit

53
Pre-Audit Approach

• 2 Upload Scenarios
• Start of Fiscal Year Implementation
• Interim Period of Fiscal Year Implementation

54
Start of Fiscal Year Implementation

• Perfect asset upload scenario
• Try to start implementations at the beginning of
  a fiscal year.
• Close last fiscal year
• Reconcile start period for depreciation for each
  asset based on the last fiscal years accumulated
  depreciation figure and the start period of
  depreciation
• Upload Capital Asset Register details
• Upload ONLY the gross value of the asset in last
  period of last fiscal year by
• debiting 20X20X and
• crediting 138BEGIN01 Beginning Balance Control

55
Note

• Beginning Balance Control is being credited
  instead of 501110 Fund Balance so
• the definition of the Asset Register and
• the Asset Balances upload can be done as a stand
  alone job
• however, when the actual beginning balances of
  the Trial Balance are uploaded, the entry should
  be
• a debit to the Beginning Balance Control and
• a credit to the Fund Balance.

56

• Run Depreciation Calculation for last period of
  prior fiscal year.
• Asset Posting Presets cause
• accumulated depreciation expense to be debited
  and
• accumulated depreciation is credited.
• Determine total accumulated depreciation
  generated by Depreciation Calculation
• Compare / reconcile accumulated depreciation with
  beginning balance of accumulated depreciation.
• Should be an insignificant difference because the
  start period has been reconciled
• Make the adjustment in the old system in last
  period of prior fiscal year

57

• Depreciation Run generates and posts a
  significant amount of Depreciation expense
  because of Asset Posting Presets.
• Must be moved from the expense side as the figure
  belongs in the Fund balance
• it is equivalent to the accumulated depreciation
  expense for all the assets since the
  establishment of the organization.
• Reverse from the Depreciation Expense and
• debit to the Beginning Balance Control for the
  full amount and
• credit the various depreciation expenses to all
  the dimensions involved
• After reversing entry, net credit of the
  Beginning Balance Control should equal the net
  value of the asset in the 20X20X section (Gross
  Value less Accumulated Depreciation)
• When the actual beginning balances for the assets
  from the Trial Balance are entered in the
  beginning balance control, the beginning balance
  control account will be zeroed.

58
Interim Period of Fiscal Year

• Upload prior fiscal years balances from last
  period of prior fiscal year.
• Upload net activity from elapsed periods of
  current fiscal year into current period.
• For the Capital Assets balances migration, follow
  the steps in the Start of the Fiscal Year
  Implementation upload.
• Then upload Gross Value of the Asset (new
  purchases) from elapsed periods of current fiscal
  year. The other side of the entry will be to the
  Beginning Balance Control.
• Run monthly depreciation calculation for elapsed
  periods of current year.
• Enter any differences between Depreciation
  Expense for elapsed periods of current fiscal
  year and calculated depreciation in current
  period to balance the net activity entry.

59
Post-Audit Approach

• 2 Upload Scenarios
• Start of Fiscal Year Implementation
• Interim Period of Fiscal Year Implementation

60
Start of Fiscal Year Implementation

• The perfect asset upload scenario
• Reconcile start period of depreciation for each
  asset based on last fiscal years accumulated
  depreciation figure with the start period of
  depreciation
• Upload Asset Register details
• Upload BOTH the gross value of the asset and the
  accumulated depreciation in last period of prior
  fiscal year in SunPlus
• Debit 20X20X and
• Credit 138BEGIN01 Beginning Balance Control
• Run Depreciation Calculation in first period of
  current year.
• Since the previous years audit has been done,
  the figure in the accumulated depreciation
  represents an audited amount
• Whatever adjustments are generated by
  depreciation calculation in the first period of
  the current fiscal year should be absorbed in
  that period.

61
Interim Period of Fiscal Year

• Follow steps for Start of Fiscal Year
  Implementation through Run Depreciation
  Calculation
• Upload Gross Value of the Asset (new purchases)
  for elapsed periods of current fiscal year
• Other side of the entries will be to Beginning
  Balances Control
• Run monthly depreciation calculation for elapsed
  periods of current fiscal year.
• Differences between Depreciation Expense in the
  old system and calculated depreciation should be
  entered in the old system in last period of prior
  fiscal year to balance the net activity entry.