Partially Deactivating Fixed Assets
PANTHEON
Part of a fixed asset (FA) can be retired, disposed of or adjusted without fully removing it from active service. For example, partial deactivation is used when a component is no longer in use, has been damaged or sold, but the remainder of the FA continues to be utilized.
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Case summary
The automatic fabric cutting attachment of the industrial sewing machine used for tent manufacturing malfunctioned and is permanently out of service. The attachment represents 30% of the total value of the sewing machine. Tecta Plc. company has decided not to replace the attachment, as the main stitching unit remains fully functional and is still used in daily operations. As a result, the person responsible will proceed with the partial deactivation of the sewing machine in the FA register.
This is done as follows:
- Accessing the Value Tab
- Partially Deactivating the Sewing Machine
- Reviewing the Old Inventory Number
- Reviewing the New Inventory Number
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The person responsible opens the Fixed Assets register by navigating to Financials | Fixed Assets | Fixed Assets.
The Fixed Assets register opens.
The person responsible uses the Toolbar features to navigate to the FA which will be partially deactivated, in this case, inventory number 00023.
The person responsible clicks the Value tab for FA 00023.
In the next step, the person responsible partially deactivates the sewing machine.
The person responsible right-clicks in the Value tab of the inventory number 00023 and selects the Partial Deactivation feature.
A new window titled Posting of Fixed Assets opens on the Partial Deactivation tab.
Since the fabric cutting attachment represents 30% of the total value of the sewing machine, the person responsible enters 0,30 in the Reduce Qty By field. The Purchase Value and Accumulated Depreciation are automatically calculated based on that value.
The person responsible then clicks the Partial Deactivation button.
A confirmation window appears, stating that the existing inventory number will be disposed and the remaining value will be transferred to a new inventory number.
The person responsible clicks OK to confirm the action.
A new information window appears, showing that the disposed FA has inventory number 00023 and the newly created FA was assigned the inventory number 00045. The person responsible clicks OK to proceed.
At the same time, the program opens a new window displaying the journal entry in the General Ledger, showing the posting for the remaining value assigned to the new inventory number 00045
In the next step, the person responsible reviews records for the old inventory number 00023.
The person responsible navigates back to the Fixed Assets register, selects the old inventory number 00023 and opens the Value tab.
The person responsible sees that a new Entry Type 6 – Disposal of fixed asset has been created, confirming that this inventory number has been disposed of.
Next, the person responsible opens the Posts tab, where a new posting entry is listed, reflecting the partial disposal of the FA.
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Hint
The posting in the General Ledger can be accessed by double-clicking the corresponding journal entry number in the Journal Entry field.
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In the following step, the person responsible proceeds to review the newly created inventory number 00045.
The person responsible selects the new inventory number 00045, and opens the Value tab, where a new Entry Type 1-Acquisition is displayed. This confirms the creation of the new FA with the remaining value.
The person responsible has successfully completed the partial deactivation of the sewing machine.
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Hint
If the FA has been disposed of incorrectly, follow the these steps:
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