FIXED ASSETS DISPOSAL IN MICROSOFT DYNAMICS AX 2012

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By The Dynamics Blog

Introduction

Fixed Assets during their entire life undergo four phases, of Acquisition, Depreciation, Value Adjustment and Disposal; we can call it Fixed Asset Life Cycle.

Microsoft Dynamics offer several ways to “Acquire”, “Depreciate”, “Adjust” and “Dispose” the assets. The Acquisition can be rotated through Fixed Asset Journal, Vendor Invoice, Inventory to Fixed Asset Journal, and proposals. The same can be done for depreciation and value adjustments.

In today’s’ post, we will go through the process of disposal and discuss the parameters for accounting. We can use “Disposal Sale” and “Disposal Scrap” to dispose the assets; it will lead the net book value of asset to “zero” and lock the asset for future transactions.

Fixed Assets Disposal

The fixed assets which are not in use or outdated or which cannot be repaired or for some other reasons, require being disposed. It is the process whereby organizations write-off the asset from their accounting book by transferring all relative values to a profit and loss account. On the other side, the sales proceeds are also parked to the same account to drive up to profit or loss on sales of fixed asset.

Out of different ways, the following two are commonly used to map the transaction in Dynamics AX 2012.

• Disposal sale
• Disposal scrap

Sale is an external disposal, whereas “Disposal Scrap” is considered an internal transaction.

Disposal Sale

Most of the times, fixed assets during their useful life are sold for a one of few reasons, they are no more usable, or the entity has had a change in requirements. Hence, the asset in its useful life can be sold in the market and it brings some sales proceeds as well. In this case the Difference between Cost, Accumulated Depreciation and the sales proceeds is the loss or profit on disposal.

Disposal Scrap

It is the situation where the asset is expired or outdated and has no market value or it cannot be sold in market. In this case the difference between Cost and Accumulated Depreciation is the Loss or Profit on disposal of asset.

Disposal of Fixed Assets in Microsoft Dynamics AX 2012

The challenge is to set-up the accounting codes in the parameters so that Microsoft Dynamics AX 2012, uses the appropriate accounts to set-off transactions. The situation becomes more complicated for the organizations where separate main accounts are used for each fixed asset group’s acquisition, depreciation and adjustments.

Fixed Assets Posting Profile holds up the accounts for sales or scrap of fixed assets, as shown in below screen shot.

 Now, we need to give the “Disposal – Sale” Account, the main account for profit and loss on sales. Appropriate account for profit and loss on scrap of fixed asset can be provided in the particular tab.

After giving the Disposal – Sale and Scrap accounts click on “Disposals” button at header of this form and select the appropriate type i.e. sale or scrap.

For every asset group we have to give main accounts for various transactions i.e.:-

• Net Book Value
  • In the main account field select the asset (cost) account. (to be credited)
  • In the offset account field select the profit and loss account. (to be debited)
• Depreciation (This Year)
  • In the main account field select the asset (cost) account. (to be credited)
  • In the offset account field select the accumulated depreciation account (to be debited)
• Depreciation (Prior Years)
  • In case there is separate accounts for prior years accumulation and current accumulation, give prior years accounts here.

In case various accounts are used to park various amounts related to fixed assets, then more lines are required to be added accordingly.

Accounts Codes Used in Screen Shots

Account Type	Account Codes
Furniture and Fixture – Cost	3-1-1-1-003
Furniture and Fixture – Accumulated Depreciation	3-1-1-2-001
Gain/Loss on Sales of Fixed Assets	4-2-2-1-001
Accounts Receivable	1-2-1-2-009

Now we process a transaction, through Free Text Invoice for the sale of Fixed Asset. 

Create a new free text invoice.

Provide customer name and date at header level of free text invoice.

Give the fixed asset number in the line details, the value model field will auto populate.

The main account will also populate as it was given in fixed assets posting profile.

Proceed to post the invoice.

Now, go to fixed asset module, select the fixed asset and click the “Value Model” button, this will show the status of asset as “sold”.

The following is the extract of voucher posted by system for disposal of asset.