Asset Category
An Asset Category defines the type of asset and its accounting treatment — including the depreciation method, useful life, and the accounts used for posting.
Creating an Asset Category
- Go to Asset > Asset Category and click New.
- Enter the Asset Category Name (e.g., "Office Equipment", "Vehicles", "Buildings").
- Configure depreciation settings:
- Depreciation Method: Straight Line, Declining Balance, or Written Down Value
- Total Number of Depreciations: Useful life in booking periods (e.g., 60 for 5 years monthly)
- Frequency of Depreciation: Monthly, Quarterly, or Yearly
- Set the accounts:
- Fixed Asset Account: The balance sheet account for this asset type
- Accumulated Depreciation Account: Contra-asset account
- Depreciation Expense Account: P&L account for depreciation
- Capital Work in Progress Account: For assets under construction
- Click Save.
Common Asset Categories
| Category | Depreciation Method | Typical Life |
|---|---|---|
| Buildings | Straight Line | 20-40 years |
| Vehicles | Declining Balance | 5-7 years |
| Office Equipment | Straight Line | 3-5 years |
| Computers & IT | Declining Balance | 3-4 years |
| Furniture | Straight Line | 7-10 years |
| Machinery | Written Down Value | 10-15 years |
| Leasehold Improvements | Straight Line | Over lease period |
| Software | Straight Line | 3-5 years |
Depreciation Methods
| Method | Description |
|---|---|
| Straight Line | Equal depreciation amount each period. (Cost - Salvage) ÷ Useful Life |
| Declining Balance | Higher depreciation in early years. Fixed % on reducing balance. |
| Written Down Value | Similar to declining balance; rate applied to current book value. |
Saudi Tax Considerations
For Saudi businesses (ZATCA):
- Depreciation rates should comply with ZATCA guidelines.
- Different asset categories may have prescribed depreciation rates for tax purposes.
- Consider maintaining separate books (using Finance Books) for tax vs IFRS reporting.