Depreciation and month-end close
Depreciation is the mechanical recognition of an asset's cost over its useful life. The numbers are arithmetic given the inputs — the real work is making sure the inputs (cost basis, in-service date, useful life, method, convention) are correct, and that the period posting closes cleanly into the GL with no orphans, restatements, or missed acquisitions. This page covers running depreciation, closing the period, and reconciling the asset register to the GL.
TL;DR — Open Fixed Assets → Month-end close. The flow walks you through: confirm in-period acquisitions, run depreciation, review the calculation, post the journals, reconcile asset register to GL. Each step is signed off so the closed period is locked.
Before you start
- Confirm all in-period acquisitions are in service before running depreciation. An asset still in In acquisition doesn't get depreciated; missing one means a missed period.
- Confirm prior period is closed. The flow blocks if it isn't — closing periods in order is the only way to keep the rollforward honest.
- Reach agreement with finance on the cutoff date. The flow defaults to the workspace's fiscal cutoff but supports the occasional alternate close (week 13 of a 4-4-5 fiscal).
The depreciation methods
| Field | What it does | Accepted values / default |
|---|---|---|
| Straight-line | Equal expense across the useful life. | (Cost − salvage) ÷ useful-life-periods. The default for GAAP unless a faster method better matches usage. |
| Double-declining-balance (DDB) | Accelerated; higher expense early. | Period rate = 2 × straight-line rate, applied to remaining book value. Often switches to straight-line near end of life. |
| Sum-of-years-digits (SYD) | Accelerated; fraction-of-remaining-life weighting. | Common for equipment that ages quickly in early years. |
| Units of production | Expense proportional to usage (miles, hours, units). | Requires periodic usage capture; ideal for vehicles + production equipment. |
| MACRS | US tax-only modified accelerated cost recovery. | Pre-defined IRS tables by asset class. Used in a separate tax book; doesn't replace GAAP method. |
Multiple books
Most workspaces maintain separate books for different reporting purposes — typically a GAAP book + a tax book, sometimes plus a management book or a regulatory book. Each book has its own depreciation method + convention + useful life for the same asset.
| Field | What it does | Accepted values / default |
|---|---|---|
| GAAP book | Financial statements per US GAAP (or IFRS for international). | Usually straight-line with category-driven useful lives. |
| Federal tax book | US federal income tax. | MACRS; useful life and convention from IRS class life table. |
| State tax books | States that don't conform to federal MACRS. | Per-state method + convention. The platform tracks each separately for state filings. |
| Management book (optional) | Internal reporting. | Workspace-defined method; commonly matches GAAP. |
Run the close
Open Fixed Assets → Month-end close
The close wizard opens; the period defaults to the current open period.
Step 1 — Confirm in-period acquisitions
Any asset acquired or placed in service during the period must be confirmed before depreciation. The wizard lists pending In acquisition items so you can resolve them before running.
Step 2 — Run depreciation
Per book, per asset, per period — computed and previewed. The preview lets you spot anomalies (an asset depreciating when it shouldn't, an unexpected useful-life change) before posting.
Step 3 — Review the preview
Total expense by category + by GL account is shown. Compare against the prior period: large swings warrant a look at new acquisitions, disposals, impairments, or method overrides.
Step 4 — Post the journals
Posting writes per-asset detail + the summary journal to the GL. Posting is one-way; reverse-and-repost is supported but only with a documented reason.
Step 5 — Reconcile register to GL
The register's ending net book value should tie to the GL balance for the asset categories. Reconciliation auto-runs; unreconciled differences route to the close-blocker queue.
Step 6 — Close the period
With reconciliation clean, mark the period closed. Asset edits for closed periods are blocked except through formal correction with documented rationale.
The rollforward
The rollforward report shows how the asset register moved from opening to closing for the period.
| Field | What it does | Accepted values / default |
|---|---|---|
| Opening net book value | Starting balance. | Ties to prior period's closing. |
| Plus: acquisitions | Capitalized cost added in the period. | From the in-service flow. |
| Plus: capital improvements | Additional cost layers to existing assets. | From the improvement flow on each asset. |
| Less: depreciation | Period expense recognized. | From the close run. |
| Less: disposals (cost + accumulated depreciation removed) | Net book value of disposed assets removed. | From the disposal flow. |
| Less: impairments | Write-downs recorded in the period. | From the impairment flow. |
| Closing net book value | Ending balance. | Ties to GL category accounts. |
Corrections after close
If an error is found after a period closes, the correction depends on materiality.
| Field | What it does | Accepted values / default |
|---|---|---|
| Immaterial correction | Small dollar error. | Catch up in the current period with a documented note. Don't re-open the closed period. |
| Material restatement | Error large enough to require restated prior periods. | Coordinate with finance + auditor. The platform supports period re-opening with full audit trail. |
| Prospective change in estimate | Useful life or salvage value changes going forward. | Recompute depreciation prospectively (remaining book value over remaining life). Prior periods are NOT restated. |
Every field, explained
| Field | What it does | Accepted values / default |
|---|---|---|
| Period | Fiscal accounting period being closed. | Calendar month, 4-4-5 week, or workspace-defined. Defaults to current open. |
| Book | Which set of rules to depreciate under. | GAAP / tax / state / management. Each runs independently in the close. |
| Depreciation method (per book) | How expense is computed. | Straight-line / DDB / SYD / units / MACRS. |
| Convention (per book) | Within-period start assumption. | Half-month / mid-quarter / mid-year / first-month / MACRS. |
| Useful life (per book) | Number of periods to depreciate over. | From asset category; per-asset + per-book override. |
| Posting GL accounts | Where expense + accumulated depreciation land. | Configured per category + per book. |
Common gotchas
- "Depreciation looks too low." Check that all in-period acquisitions were placed in service before the run. In-acquisition assets don't depreciate; missing them under- states expense.
- "GL doesn't tie." Most often: a manual GL entry posted outside the close flow, or a prior-period adjustment that didn't roll. The reconciliation shows the variance + its most-likely source.
- "Useful life was wrong from day one." This is a change in estimate, not an error. Adjust prospectively — recompute depreciation on the remaining book value over the new remaining life. Don't restate prior periods unless the original input was wrong (not just a re-estimate).
- "We bought an asset late in the period." The convention controls. Half-month gives half a period of depreciation if in-service before mid-period and none if after; mid-quarter works similarly at the quarter level. Make sure the convention matches your finance policy.
- "Tax book has very different numbers." That's expected. MACRS accelerates relative to GAAP straight-line; expect early-year tax depreciation to exceed GAAP, late-year to fall below. The deferred-tax flow (outside this module) reconciles the timing.
Troubleshooting
| Error code | What it means | Fix |
|---|---|---|
CLOSE_PRIOR_PERIOD_OPEN | You tried to close a period before the prior one. | Close periods in order. |
CLOSE_PENDING_ACQUISITIONS | In-acquisition assets exist in the period. | Place them in service or document why they remain pending. |
CLOSE_REGISTER_GL_VARIANCE | Register ending balance doesn't tie to GL. | Use the variance report to identify the breaking entry; correct before closing. |
CLOSE_REOPEN_REQUIRES_REASON | Closed period re-open attempted without rationale. | Provide the documented reason; re-open is logged. |
DEPRECIATION_METHOD_LOCKED_AFTER_POSTING | Method change attempted after periods have posted. | Use the change-in-estimate flow with prospective recomputation. |
How this is recorded
Every close run, every preview, every posted journal is written to the close ledger with the actor + timestamp + the book + the amounts. The ledger is the artifact the auditor reads to confirm depreciation is computed correctly and consistently with workspace policy. Retention follows the workspace audit-log retention FINANCE floor.
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