How to Book Transaction for Fixed Assets in MS Dynamics Ax 2012, Best Practices

Normally, there are three scenarios found for booking transactions for Fixed Assets, to book the same in MS Dynamics Ax 2012, the followings could be done.

Three major scenarios:

1.    Purchasing an Asset, through Purchase Order, and then Product Receipt, and Invoicing

2.    Converting Inventory Items from Stock to Fixed Assets.

3.    Purchasing an Asset, electrical and civil work done by own worker for placing the Asset

The steps to do the above requires some prerequisites like setups and parameters in Ax.

Scenario 1:  Procurement of a Centre-less Grinding Machine for Rs. 8,50,000.00, through creation of Purchase Requisition, Purchase Order, Product Receipt, and then Invoicing the same. For capitalising the Grinding Machine purchased, a Fixed Asset Card to be created, where value of the newly purchased machine could be updated. Also, add the additional cost incurred for installation, and freight. The installation charges of Rs.15,000.00 paid to a vendor, Freight paid Rs. 8,000.00.

Solution: The above set of transaction suggests that two different kinds of transaction took place, one is Acquisition and another is Acquisition Adjustment. The purchase of the Grinding Machine is Acquisition in Ax and the Allocation of other charges such as the installation charges paid, Freight paid are the Acquisition Adjustment. So, to book all the transaction, the following steps could be taken:

a.   Creation of a Purchase Requisition for the Machine, Installation Charges as service

Created a Purchase requisition number 641 for Centre-Less Grinding Machine. Product code for Fixed Asset related to Plant and Machinery is PM-0000001, which is under the Procurement Category - [Fixed Assets]. 

b.   Creation of a Fixed Asset Card, as Grinding Machine

Created a Fixed Asset Card, under Fixed Asset Group – FAPM (Fixed Asset Plant & Machinery). The Fixed Asset Number is FAPM-000463.

c.    Assigning the Fixed Asset Card with a proper Value Model

Assigned the Value Model with the Fixed Asset Card, PM-Plant and Machinery. The status showing, Not yet acquired, as the acquisition of the Machine did not taken place.

d.   Creation of a Purchase Order for the above requisitions

Select the Approved Purchase Requisitions, and created a new purchase order for the Machine.

In the Purchase Order assigned the Fixed Asset Number related to the Centre-Less Grinding Machine, created in Fixed Asset Card, also the Transaction type is Acquisition.

Then in the same way created another Purchase Order for the Service, Installation of the Machine, as shown below:

e.   Product Receipt for the above Purchase Orders

Received the Machine and in the same way received the Installation Charges Service.

f.    Invoicing of the Purchase Orders for the Machine and the Installation Charges

After invoicing of the Machinery, in the Asset Card of the Machine, Net Book Value could be noticed as Rs. 8,50,000.00. Also the Acquisition date is 25-09-2014 as shown in the Fact Tab.

On looking into the transaction detail the related Voucher number, Transaction Date, Fixed Asset Number, Transaction Type, Amount could be confirmed as shown below:

Same way the Installation Charges, is purchase invoiced.

If we look into the Fixed Asset Card of the Machinery after invoicing of the Installation Charges, Net Book Value increased from 8,50,000 to 8,865,000 (8,50,000 Plus 15,000), as shown below:

Now the transaction, shown for the Machine is shown below:

g.    General Journal for the Freight Charges Paid

Created a General Journal Voucher for the Freight Charges paid on cash, as shown below, where debited the Fixed Asset Card and credited cash account, as cash has been paid for the expense. 

In the Posting Profile of the Fixed Asset, the Acquisition, for the value model PM being attached with the main account 1225710 – P & E – Owned (Plant and Equipment Owned), therefore, while posting the transaction for Fixed Asset FAPM-0004463, debited to the main account 1225710. Look into the Voucher, by selecting it from Inquiry Menu Option, as shown below:

The Fixed Asset Posting Profile is shown below:

Now if we look into the Fixed Asset Card, the Net Book Value increased from Rs. 8,65,000 to Rs.8,73,000, as the freight charges is being added into the fixed asset.

If we look into the Transactions for the Fixed Asset Card, there are now three numbers of transaction, as shown below:

h.   The main account 1225710 – P & E – Owned (Plant and Equipment Owned), now contains three transaction entries, i.e.

·         Cost of the Machine –       8,50,000.00

·         Installation Charges -          15,000.00

·         Freight Charges -                  8,000.00

Scenario 2: A Furnace (project number CP-05-12) is built by using items consumed from the inventory. For this purpose a project code is being issued say CP-05-12. Convert the project CP-05-12 to Fixed Asset.

Solution: In this case material are being purchased and issued to a warehouse named with the project CP-05-12. Therefore, all the material transferred from main warehouse to the project warehouse could be converted into Fixed Assets. If say for example the Financial Year ends before the conversion, then the balance sheet must show the value allocated in the project as Capital Wok in Progress as asset. Therefore, while transferring the inventory item from main warehouse to the CP-05-12 warehouse, financial transaction must be generated, so that the Stock Account must be deducted and Capital Work in Progress must be added with the value of the item.

a.   Creation of a Purchase Requisition for the Material required for creating the Asset, Making Charges as service

Different Purchase Requisition for different items and services were created in the same way as shown in the scenario 1. The list of items required for built the Furnace shown below (imaginary for example):

·         MS Sheets – 4000 kg - IRN-00025

·         MS Angles – 500 kg – IRN-00026

·         Bricks H.A. 60% – 2000 pcs - REF-00021

·         H. A. Filling Mass – 100 kg REF-00039

·         H. A. Mortar Powder – 50 kg - REF-00038

·         Ceramic Tube – 200 m - REF-00034

·         Kanthal Wire – 5 Rolls - ELE-00006

·         Insulated Wire – 500 m - ELE-00003

·         Switches 15 A – 10 pcs - ELE-00007

·         Fabrication Job - SVC-00008

·         Mason Job - SVC-00009

·         Electrical Installation Job - SVC-00010

·         Installation Charge - SVC-00004

b.   Creation of a Warehouse, named CP-05-12

c.    Creation of a Purchase Order for the above requisitions

Created a Purchase Order and did not marked it as a Fixed Asset.

d.   Product Receipt for the above Purchase Orders

Received the Products against the Purchase Orders.

e.   Invoicing of the Purchase Orders for the material and the Installation Charges

Invoiced the Purchase Orders for the Materials and the Installation Charges. The installation charges to be transferred to the Capital Work in Progress – 1221000, so that expenses could be capitalised.

f.     Creation of a Fixed Asset Card, as Induction Furnace

Created a Fixed Asset Card, FAPM-000432, Induction Furnace.

g.    Assigning the Fixed Asset Card with a proper Value Model

Assigned a Value Model as PM – Plant & Machinery

h.   General Journal for the Freight Charges Paid – Debit to the Capital Work in Progress – 1221000

Created a Journal Voucher for payment of the Freight Charges, for the Furnace Project CP-05-12.

i.     Transfer of Material from the Main Warehouse to CP-05-12 Warehouse

j.    Convert the Inventory to Fixed Assets

To capitalise and add the incidental expenses to the Fixed Asset Card, FAPM-000432, Induction Furnace, created a General Journal entry, as shown below:

k.    Look into the Financial Transaction, Inventory Transactions, Fixed Asset Card

The Fixed Asset FAPM-000432 – Induction Furnace, has a Net Book Value of Rs. 11,17,250.00

On looking into the Transaction – Fixed Asset Transaction, clearly could be noted that all the individual entries are booked into the Fixed Asset as Transaction Type – Acquisition.

This is also evident from the Main Ledger Account 1225710 – P & E – Owned, which suggests that the transactions are booked into the Main Ledger Account.

Financial Reason Codes, Setup in MS Dynamics Ax 2012

The Reason Codes are used to provide a narration or description to a transaction might be a change in the normal transaction. 

Reason codes are standardized codes that can be used in various transaction types or changes to field values to provide background data about the transaction. For example, auditors or managers frequently want to see reasons recorded for various transactions such as reversals. A reason code is a code that users can select to record the reason for a change, such as a write-down adjustment or payment reversal.

Reasons codes can be created that are specific to your organization. Users must select reason codes only if the parameters for a module are set up to require them. The reason codes can be for various types of transactions or other entries. Also a reason comment can be entered in the same forms where reason codes are selected. Reason comments are optional. Although one can set up default reason comments for each reason code, this setup is not required. If a reason code is selected for a transaction, the default comment that is set up in the reasons form for each module is displayed in the Reason comment field. One can change the default reason comment. If a reason comment is entered first and then a reason code is selected, then reason comment will not be replaced.

When a standard reason codes is used instead of transaction text, a guidelines is there for which codes to select from. Standard reason codes also allow management and auditors to analyze transaction history by specific reason.

Some examples of Reason Codes:

ADDR	Check returned - unknown address
ADJ	General adjustment
ALLOC	Please enter a comment
APPR	Outside appraisal
AUCTION	Sold at auction
BESTDEAL01	Best deal on the qty ordered
BESTDEAL02	Best deal on the pricing
COUNTER	Sold  at Counter
DELIVERY01	Delivery Time
DELIVERY02	Late Delivery
DISPUTED	Customer disputes the transaction
ELIM	Please enter a comment
ERROR	Clerical error
FREIGHT	Freight cost
INST	Installation cost
LOST	Check lost in mail

Reason codes can be used with the following:

§  General Ledger

§  Accounts Payable

§  Accounts Receivable

§  Cash and Bank

§  Fixed Assets

How to setup reason codes for financial modules?

Financial reasons form is in Organization administration to create reason codes for a variety of financial modules, or can be alternatively open a reasons form from a specific module to set up reason codes for only that module. One can also specify whether reason codes are required for a module, also can specify reason code requirements in the parameters form for most modules.

  

Reason codes through General ledger, do the following:

1.    Click General ledger > Setup > Ledger reasons.

.    Click New to create a reason code.

3.    In the Reason code field, enter a code for the reason.

4.    In the Default comment field, enter a description for the code.

A reason code can be selected in the following General ledger entry processes:

§  General journal entry
§  Process allocation requests
§  Elimination proposal
§  Consolidation, Online periodic

To modify a Reason codes through General ledger, do the following:

1.    Click General ledger > Setup > Ledger reasons.

2.    Select the Reason Code to modify.

3.    Modify the Default Comment for the reason code.

4.    Clear the Ledger check box. As soon as the Ledger check box is cleared, the reason code is no longer displayed in the General ledger transaction entry forms, and is unable to be used.

To delete a Reason codes through General ledger, do the following:

1.    Click General ledger > Setup > Ledger reasons.

2.    Select the Reason Code to be deleted.

3.    Clear the Ledger check box. You can delete a Reason code only if no account types are associated with it. If the Reason code has been selected for use from another module, clear the other Account type check boxes or view the Reasons form from Basic to clear all Account type check boxes.

5.    Click the delete icon.

6.    Click Yes in the Confirm deletion dialog box.

Reason codes through Accounts payable, do the following:

1.    Click Accounts payable > Setup > Vendors > Vendor reasons.

2.    Click New to create a reason code.

3.    In the Reason code field, enter a code for the reason.

4.    In the Default comment field, enter a description for the code.

Some Examples of some Vendor Reason Codes:

ADDR	Check returned - unknown address
BESTDEAL	Best deal on the qty ordered
BESTDEAL_P	Best deal on the price
DELIVER01	Delivery time
DELIVERY	Late delivery
ERROR	Correction of clerical error
FREIGHT	Freight cost
INST	Installation cost
LOST	Check lost in the mail

In Accounts receivable, one can set up parameters to require reason codes when transactions are reversed or canceled, or when return orders are posted. Thus one can then view historical reasons in the Customer transactions and Voucher transactions forms.  Both financial reason codes and return reason codes are used in Accounts receivable. One can set up financial reason codes in either the Financial reasons form in Organization administration or in the Customer reasons form in Accounts receivable, and one can use them with free text invoices, reversals, and cancellations. Also one can set up return reason codes in the Return reason codes form, and can use them with return orders.

Reason codes through Accounts receivable, do the following:

1.    Click Accounts receivable > Setup > Customers > Customer reasons.

2.    Click New to create a reason code. As you can see that the Vendor Reason also displayed in this form, just mark the check box if want to mark the same for Customer also.

3.    In the Reason code field, enter a code for the reason.

4.    In the Default comment field, enter a description for the code.

5.    To require reasons for changes in Accounts receivable, select the appropriate check boxes on the Reason code requirements FastTab in the General area of the Accounts receivable parameters form.

6.    Click Accounts receivable > Setup > Accounts receivable parameters.

Reason codes through Cash and bank management do the following:

1.    Click Cash and bank management > Setup > Bank reasons.

 

2.    Click New to create a reason code.

3.    In the Reason code field, enter a code for the reason.

4.    In the Default comment field, enter a description for the code.

5.    To require reasons for changes in Cash and bank management, select the appropriate reason code requirements check boxes in the General area of the Cash and bank management parameters form.

6.    Click Cash and bank management > Setup > Cash and bank management parameters form.

Reason codes through Organization administration, do the following:

1.    Click Organization administration > Setup > Financial reasons.

2.    Click New to create a reason code.

3.    In the Reason code field, enter a code for the reason.

4.    In the Default comment field, enter a description for the code.

5.    Select the types of accounts that the reason code can be used with.

Whenever a Fixed asset is entered into the system it need is complete description, it require reason codes when specific asset transaction types are entered in journals, or may require reason codes when the Sales value, Service life, Depreciation periods, or Expected scrap value fields are modified in the Value models or Depreciation books forms. Sometimes, it require a reason when one of the field values changes, a Reason form is displayed when changes are saved, and it must enter a reason before can close the Value models or Depreciation books form. For example, A car accident caused the value of a car to decrease from Rs. 8,00,000 to Rs. 5,00,000. So a write-down adjustment for Rs. 3,00,000 in the Fixed assets journal form is required, and say selected a reason code in the transaction line called CARS (say). Now, when open the value model for the Car and reduce the service life by one year, reduce the depreciation periods by one period, and reduce the expected scrap value by 3,00,000. Because Fixed assets is set up to require a reason code for changes to these fields, you are prompted to select a reason in the Reason form when you save the value model.

Some examples of Fixed Assets Reason Codes:

APPR	Outside appraisal
AUCTION	Sold at auction
ERROR	Error of clerical staff
FREIGHT	Freight cost
INST	Installation cost
REBUILT	Re-built key component
VACC	Vehicle accident
W&T	Wear & tear
ALL	Reason Code - All
APPR	Outside appraisal

Reason codes through Fixed assets, do the following:

1.    Click Fixed assets > Setup > Asset reasons.

2.    Click New to create a reason code.

3.    In the Reason code field, enter a code for the reason.

4.    In the Default comment field, enter a description for the code.

 

5.    Click Fixed assets > Setup > Fixed assets parameters.

6.    Click Fixed assets.

7.    On the Reason codes FastTab, specify options for reason codes:

To require that users enter a reason for changes to the

a.   service life,

b.   depreciation periods,

c.    expected scrap value, or

d.   sales value for a fixed asset, select the Require reasons for asset changes check box.

8.    To require that users enter a reason for a specific fixed asset transaction that is entered in a journal, select the transaction types and then click the arrow buttons to move the transaction types from the Not required list to the Required list.