First of all, let’s look at the two different depreciation profiles that will be used in our use case

Navigate to Fixed Assets > Setup > Depreciation Profiles

Straight line service life

Straight line life remaining

Create two fixed assets (One for Straight line service life and one for the straight line life remaining)

Navigate to Fixed Assets > Fixed Assets > Fixed Assets

Click on New and create fixed assets with required details

Straight line service life

Straight line life remaining

Acquire both assets (In my case, I am acquiring via fixed assets journal)

Run depreciation proposal for the month of August (31-Aug-2024) to check the depreciation calculation

You will notice the same calculated depreciation amount for both the depreciation methods.

The calculation is as follows: (1,000/36) = 27.77

Let’s post an upwards acquisition adjustment of 200 for each asset on 05^th September 2024.

Now, run the depreciation for the month of September 2024 and verify the results.

Straight line service life:

Cost of asset = 1,000

Acc. Dep = 27.77

Net Book Value before adjustment = 972.23

Upward Adjustment = 200

Useful Life at the time of acquisition = 36 Months

Depreciation = (Cost amount + Adjustment) / Total useful life at the time of acquisition

= (1,000 + 200) / 36 = 33.33

Straight line life remaining:

Cost of asset = 1,000

Acc. Dep = 27.77

Net Book Value before adjustment = 972.23

Upward Adjustment = 200

Remaining Useful Life at the time of acquisition = 35 Months (Here, remaining periods are used)

Depreciation = (Net book value + Adjustment) / Remaining useful life

= (972.23 + 200) / 35 = 34.49

Observation:

Straight line service life: If any adjustment is posted during the useful life of an asset, the affected asset’s net book value might not be zero at the end of its useful life.

Straight line life remaining: After posting the adjustment, system automatically calculates the depreciation amount based on the remaining useful life of particular asset so that the Net book value reaches zero at the end of its useful life.