You can reverse fixed asset transactions, and Accounts payable and Accounts receivable transactions that are associated with a fixed asset. You also can revoke a reversed transaction.

When you reverse or revoke a transaction that was not the most recent transaction posted to the value model or depreciation book for the asset, you should first determine whether any depreciation transactions were posted after the transaction that you are reversing. The reason for this verification is because depreciation is not recalculated when you reverse a transaction, so depreciation often is overstated or understated after the reversal, as shown in the examples.

To ensure that depreciation is correct when you reverse a transaction, do not proceed with the reversal if you receive a message during that process explaining that depreciation will not be recalculated. Instead, first reverse the depreciation transaction that was posted after the transaction you tried to reverse, and then proceed with the reversal. You will not be warned about depreciation recalculations and you can proceed with the reversal.

The following examples show the calculations that occur if you choose to continue beyond the warning message instead of first reversing the depreciation transactions.

# Example 1: Depreciation is overstated

An asset is set up with a 5-year useful life and straight line depreciation (60 depreciation periods). In this example, depreciation is overstated.

#### Asset transaction history

Date

Transaction type

Amount

January 1

Acquisition

59,000.00

January 1

1,000.00

January 31

Depreciation (created using a proposal for one period of depreciation)

1,000.00

Calculation: Book value (59,000 + 1,000) / Number of depreciation periods remaining (60)

Date

Transaction type

Amount

January 1

–1,000.00

#### Depreciation effect

Date

Transaction type

Amount

February 28

Depreciation (proposal)

983.05

Calculation: Book value (59,000 - 1,000 depreciation) / Number of depreciation periods remaining (59)

Depreciation is overstated by 16.95 (1000 - 983.05).

# Example 2: Depreciation is understated

An asset is set up with a 5-year useful life and straight line depreciation (60 depreciation periods). In this example, depreciation is understated.

#### Asset transaction history

Date

Transaction type

Amount

January 1

Acquisition

59,000.00

January 1

1,000.00

January 31

Depreciation (created using a proposal for one period of depreciation)

966.67

Calculation: Book value (59,000 - 1,000) / Number of depreciation periods remaining (60)

Date

Transaction type

Amount

January 1

–1,000.00

#### Depreciation effect

Date

Transaction type

Amount

February 28

Depreciation (proposal)

983.62

Calculation: Book value (59,000 - 966.67 depreciation) / Number of depreciation periods remaining (59)

Depreciation is understated by 16.95 (983.62 - 966.67).