How to purchase an Asset

[Ahmed Samir]

Hello,

I am purchasing a tool (which is an asset for my company). I went through the process of PO and PI. However in ITEM field in PI, under Accounting section, I only find "Expense Head" drop down menu which lists all the possible expenses, but not other accounts like Fixed Assets. Moreover, the PI will not save until I select an Expense Head. This affects how the numbers show up in the Trial Balance, instead of having a higher Assets value, I am having a very high Expenses value. Am I missing something? I am expecting to find a "Is Asset" field somewhere.

Please help.

Best regards,

Ahmed

[Umair Sayyed]

Hello Ahmed,

This is your masters should be configured to have purchase value of asset item updated under Assets, and not under Expense.

Accounts:

Account >> Setup >> Accounts Setting

Field "Make accounting entry for every stock movement" should be checked. This setting will activate perpetual inventory valuation system in your ERPNext account. As per this system, expense for your purchases will be booked when you deliver them.

Item:

Is Fixed Item field (under Inventory section) for the asset item master should be updated as Yes.

Warehouse:

Add separate Warehouse for fixed asset items. All fixed asset stock transactions should be made under this Warehouse only. Accounting ledger will created for each Warehouse in Chart of Account >> Current Asset.
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With these settings in place, on submission of Purchase Receipt for asset item, you will have value of fixed asset item updated under fixed asset's warehouse.

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Thanks and Regards,
Umair Sayyed
www.erpnext.com

[Ahmed Samir]

Thanks Umair, shouldn't this new warehouse be classified under Fixed Assets not Current Assets ?

[Umair Sayyed]

Hello Ahmed,

You can move accounting ledger of fixed asset warehouse from Current Asset group to Fixed Asset. Steps below:

1. Accounts >> Chart of Account >> Current Asset
2. Click on accounting ledger of Fixed Asset Warehouse.
3. Click on Edit.
4. Edit Parent Account for Fixed Asset Warehouse account. Select Fixed Asset group (or any other group) where you wish to place Fixed Asset Warehouse ledger.
5. Save.

Purchase Invoice:

Purchase Invoice has Expense Account field as Mandatory. This is required in Purchase Invoice when made for service items, or when system is set to periodic inventory valuation system.

Making Purchase Invoice for stock items will not have effect on the Expense Account. You can set Default Expense Account in the Company master, hence no need to update Expense Account manually each time.

Setup >> Master >> Company

Please check following link to learn how accounting entries are posted as per perpetual inventory valuation system.

https://erpnext.com/user-guide/stock/perpetual-inventory

On Mon, Jul 14, 2014 at 1:49 PM, Ahmed Samir <ahmed.p...@gmail.com> wrote:

Thanks Umair, I tried it and now the tool's value is updating in my new warehouse (Fixed Assets Warehouse) once I made a Purchase Receipt from the PO. But now I want to pay for the item, so I am raising a Purchase Invoice, yet again in the purchase invoice the value of the item is asking for an Expense Account. Does this is mean that the value of my purchase will be recorded 3 times? Credit Cash - Debit Fixed Assets Warehouse - Debit an Expense account ?!

Regards,

Ahmed

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[Ahmed Samir]

Thank you very much. Really helpful. I tried it and it works, and now I'll spend sometime learning as well.