NetAsset - Reason Behind Clearing Accounts

Overview

This article provides an explanation of the different recommended clearing accounts in NetAsset and their respective use cases. 

Fixed Asset Proposal/Clearing Account

The Fixed Asset Proposal/Clearing Account is used to record new asset proposal transactions, which can be entered through a journal entry or via vendor bill coding.

Vendor Bill/Journal Entry:

When a vendor bill or journal entry is created for an asset, the following entry should be recorded:

• Debit: Fixed Asset Proposal/Clearing Account
• Credit: Cash

NetAsset Capitalization Entry:

The balance in the clearing account will remain until the asset is capitalized or built up. Once this occurs, NetAsset will record the following journal entry to reverse the balance in the clearing account:

• Debit: Fixed Asset
• Credit: Fixed Asset Proposal/Clearing Account

Construction in Progress Proposal/Clearing Account (CIP)

The Construction in Progress (CIP) Proposal/Clearing Account is used to accumulate and aggregate amounts for ongoing construction projects.

Vendor Bill/Journal Entry:

When a vendor bill or journal entry is created for a construction asset, the following entry should be recorded:

• Debit: CIP Proposal/Clearing Account
• Credit: Cash

NetAsset Capitalization Entry:

Similar to the Fixed Asset Proposal account, the balance in the CIP clearing account will remain until the asset is capitalized or built up. Once this occurs, NetAsset will record the following journal entry to reverse the balance in the clearing account:

• Debit: Fixed Asset
• Credit: CIP Proposal/Clearing Account

Go-Live Clearing Account

The Go-Live Clearing Account is utilized during the go-live process to establish mid-life asset balances—including the gross asset value and accumulated depreciation.  This account is also used in clearing out the asset balances that were on the books prior to going live in NetAsset. 

NetAsset Go-Live Entry:

When Go-Live entries are processed, the system automatically creates the following journal entry:

• Debit: Fixed Asset
• Credit: Accumulated Depreciation
• Credit: Go-Live Clearing Account

Manual Entry to Reverse Pre-NetAsset Balances:

As part of the go-live process, pre-NetAsset fixed asset balances must be reversed—and the go-live clearing account will be cleared during this process. Depending on prior accounting practices, this journal entry may involve different accounts. The following entry provides an example of how asset information previously recorded might be removed as part of the NetAsset go-live process:

• Debit: Accumulated Depreciation
• Debit: Go-Live Clearing Account
• Credit: Fixed Asset

Sale of Assets Receivable/Payable Clearing Account

The Sale of Assets Receivable/Payable Clearing Account is used to record receivables or payables related to the disposal/sale of a fixed asset. 

NetAsset Disposal/Sale of Asset Entry:

When an asset is disposed of or sold in NetAsset—and cash is received or paid as part of the transaction—the system will automatically generate a transaction similar to the following: 

• Debit: Accumulated Depreciation
• Debit: Sale of Assets Receivable/Clearing Account
• Credit/Debit: Gain/Loss on Sale of Asset
• Credit: Fixed Asset

Invoice or Vendor Bill:

Depending on whether cash was received or paid as part of the asset disposal/sale, an invoice or vendor bill will be used to clear the clearing account and post to the appropriate receivable or payable account. The example below illustrates how this would look in the case of an invoice:

• Debit: Accounts Receivable
• Credit: Sale of Assets Receivable/Payable Clearing Account