University of Minnesota
Internal Sales
“Capital Equipment and Depreciation
Reconciliation”
Learning Objectives
As a result of this session, participants will be able to:
• Set-up the account structure to record the purchase of a capital
asset and record depreciation
• Reconcile current fixed assets.
• Include equipment expense (depreciation) in the rate
development, budget and record actuals
• Validate depreciation with Inventory Services vs. rate
Development and Budget.
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Inventory Services Website
Located at :
Inventory Services Website:
http://www.finsys.umn.edu/inventorysvs/inventorysvshome.h
tml
Instructions for Transferring Capital Equipment Assets
http://www.policy.umn.edu/prod/groups/president/@pub/@fo
rms/documents/form/um1556.pdf
Transferring or Selling Capital Equipment Assets to Another
University Department:
http://www.policy.umn.edu/Policies/Finance/Inventory/PROP
ERTY_PROC02.html
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Inventory Services Website
Located at :
Transferring or Selling Capital Equipment Assets to Another
University Department:
http://www.policy.umn.edu/Policies/Finance/Inventory/PROP
ERTY_PROC02.html
Asset Accounting, Asset Management, Asset Transfer Form –
Financial Management Training Courses http://www1.umn.edu/ohr/trainingservices/financial/efs/ind
ex.html#aa
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History
• All capital assets in 115X as of 3/28/2011 were moved to the
ISO Plant Fund 7201 – Internal Sale Capital Purchases.
• The total balance for the operating fund and plant fund did not
change.
• Depreciation did not transfer from the operating fund to the
plant fund.
• Any other capital equipment accounts did not transfer ex.
Gain or losses, disposals ect.
• See Handout for communication and example
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Guiding Principles
Guiding Principles:
• Internal Organizations can recover the cost of capital
equipment in the rates they charge other University
Departments by including the appropriate depreciation in
the rate development. Per federal regulations and U of M
Policy, capital equipment cannot be purchased on ISO
operating funds; it must be purchased and transferred to
the plant fund, and the cost recovered for by the periodic
depreciation charges to the ISO operating fund.
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Objectives
Objectives:
• Record depreciation in the ISO operating fund as an
expense (use of funds) that relates to the revenue
generated.
• All fixed assets transferred to the internal sales Plant Fund
7201 after purchased.
• Depreciation included in the rate development reconciles
to the depreciation recorded in the ISO operating fund and
the plant fund.
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Reconciliation Process
• UM Reports for Non-Sponsored Reports - “Account
Budget Status for Current Non-Sponsored Funds”
– Enter DeptID
– Group the report by Fund #
– Group the report by Program #
– Choose the option “Include Plant and Agency Funds”.
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Reconciliation Process
• Run a detailed transaction report for the Equipment
Acquisitions. This will include a list of all the fixed assets
transferred into the plant fund.
– Enter DeptID
– Enter for Fund Code 7201 – ISO Plant Fund
• Run a public query for department assets.
– ASSETS_BY_UNIT_AND_DEPT
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Reconciliation Process
• If there is value in account 168001 - Equipment
Acquisitions or 168250 - Equipment in the operating fund
1150 or the fund designated for the ISO, the equipment
value and depreciation must be moved to the Plant Fund.
– Complete transfer documents. UM 1556: Capital
Equipment Asset Transfer Form (pdf)
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Reconciliation Process
• The amount that is in account 168001 – Equipment
Acquisitions in the plant fund should be the purchase price
plus all acquisition costs to put the capital asset in place of
the capital equipment for the ISO.
– Compare the detailed transaction report to the list of
expected equipment.
– Compare the Assets by Unit and Dept report to the list
of expected equipment.
– Transferred all ISO assets to the ISO Plant Fund.
– Complete transfer documents to move assets.
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Reconciliation Process
• The carry forward balance in the plant fund should be the
purchase price plus all acquisition costs of the asset less
accumulated depreciation (net book value) at year end.
– If not, make correcting entry to record accumulated
depreciation.
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Reconciliation Process
The amount that is in account 760101 – Equipment
Depreciation in the plant fund should be the total amount
of the depreciation for the fiscal year.
– If not correct, make correcting entry to record
accumulated annual depreciation.
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Reconciliation Process
• The annual amount of depreciation for all ISO capital
equipment should be included in the internal sales rate
development.
• The total amount of depreciation recorded in the internal
sales operating fund (1150 preferred) should equal the
amount of total depreciation in account in the plant fund.
• The amount of depreciation transferred from the operating
fund – 610301 – Non-Mandatory Transfer out to the plant
fund 600301 – Non-Mandatory Transfer In .
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Results
• Depreciation in the annual rate development equals the
annual depreciation transferred out of the operating fund.
• The annual depreciation in the Plant Fund will equal the
annual amount of the depreciation transferred into the plant
fund.
• The rates should be adjusted is there are any additions,
retirements or upgrades.
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Summary
•
•
•
•
•
Include depreciation in the rate development
Capitalize capital assets
Only include purchased or donated assets
Use ISO Plant Fund
Transfer depreciation from operating fund to plant fund to record
expense and replenish equipment purchase value
• Use Inventory Services to support activity
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Questions & Answers
Questions & Answers
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