Overview
The two most commonly used methods for recording a property and its assets are the following:
Separate Depreciable Assets
- Splitting the cost of a property from its depreciable assets.
- Each asset recorded in their own account.
One Singular Property Account
- Collating a property's cost with the cost of all depreciable assets.
- All assets recorded to the same property account.
This article includes step-by-step instructions for how you can change methods between the two shown above while maintaining the cost of the property.
Should Depreciation be posted before or after these changes?
The recommended best practice is to first process the change of accounts, posting the depreciation after the changes have been made.
- This is recommended to ensure the correct depreciation values related to each Asset/Property are carried forward into future periods.
There may be situations where posting depreciation before the changes is required, this ultimately depends on your requirements and how depreciation is currently being recorded.
Instructions
Separate Depreciable Assets to a Singular Property Account
- Begin by determining the current CGT Cost Base of the Separate Depreciable Assets.
Navigate to Reports and generate the Unrealised Capital Gains report:
This figure will be used in the transaction disposing of the singular property account.
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- Using the CGT Cost Base is necessary to ensure no Capital Gains/Losses are recorded.
- Navigate to the Transaction List and select New Transaction - Journal.
Enter a cost base adjustment transaction similar to the following:
ACCOUNT UNITS AMOUNT CR Asset 1 (Old Asset) 1 Unit $CGT Cost Base CR Asset 2 (Old Asset) 1 Unit $CGT Cost Base Repeat for all Separate Depreciable Assets DR Property 0 Unit $Total CGT Cost Base of all Assets
- Once the transaction has been processed, review the Depreciation Schedule.
Assets that was previously added to the schedule can be deleted by clicking the bin icon:
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- Note: A Depreciation Schedule Worksheet is typically set up for Property Accounts that also include Separate Depreciable Assets.
- Finally, review the Unrealised Capital Gains report, ensuring the cost bases are correct:
Singular Property Account to Separate Depreciable Assets
Prerequisite: Accounts will need to be created for each Separate Depreciable Asset.
- Instructions can be found in the Separate Depreciable Assets article.
- Begin by determining the current CGT Cost Base of the property.
Navigate to Reports and generate the Unrealised Capital Gains report:
This figure will be used in the transaction disposing of the singular property account.
-
- Using the CGT Cost Base is necessary to ensure no Capital Gains/Losses are recorded.
- Navigate to the Transaction List and select New Transaction - Journal.
Enter a disposal/purchase transaction similar to the following:
ACCOUNT UNITS AMOUNT CR Property (Old account) 1 Unit $CGT Cost Base DR Asset 1 1 Unit $Cost base of Asset 1 DR Asset 2 1 Unit $Cost base of Asset 2 Repeat for all Separate Depreciable Assets DR Property (New account) 1 Unit $Remaining Cost Base
- Once the transaction has been processed, review the Depreciation Schedule to ensure depreciation is being calculated correctly on the new assets:
- Finally, review the Unrealised Capital Gains report, ensuring the cost bases are correct: