Let us assume that in this case we will use straight-line depreciation.

When purchasing a used fixed asset, it has to be depreciated over its estimated useful life. What this means is that in practical use you have to:

a) enter only the puchase price of the asset and change (recalculate) depreciation rate accordingly. Here the procedure is equivalent to entering a new fixed asset. You only have to use a different depreciation rate (see Acquisition of a New Fixed Asset).

b) enter both the purchase price as well as the adjusted value to be able to use the same depreciation rate as for the new fixed asset. That is, both of them have to be entered in the Fixed Assets register.

Example:

Purchase a used fixed asset whose service life is 5 years. The asset is 1-year old at the time of acquisition. You purchase it for €5,000.

Hence you have to write off €5,000 over the next four years.

Variant a) Enter purchase-related data as in acquisition of a new fixed asset and use a 25% depreciation rate.

Variant b) Enter purchase price and adjusted value so that the offset balance on both accounts shows purchase price of goods. In addition use a regular 20% depreciation rate.

We are aware that using straight-line depreciation with the asset that was 1-year old at the time of acquisition we have to increase purchase price by depreciated value (20%) and post it to the accumulated depreciation account. Here the Fixed Assets account shows the same value as the one under variant a), that is, the fixed asset's purchase price.

Below you can observe lines of journal entry:

ID of journal entry with which you posted acquisition is entered in the Related Document field. Simply double-click ID to open it.