Hi

When the asset is disposed why does the system reverse the depreciation already booked. For e.g. let us say user depreciates the asset upto period August and then disposes off the asset in September. On disposing of the assset system is giving a credit to depreciation expense account.

Can anyone explain if this is a bug or am I missing any setup??

You are not missing anything in your set up. When you have an asset which you are depreciating, you debit depreciation expense and credit accumulated depreciation. Your balance sheet shows the assets less accumulated depreciation for a net fixed asset balance. When you dispose of the asset, the accumulated depreciation is reversed because you no longer own the asset.

I am aware that the accumulated depreciation gets reversed when the asset is sold but my question is why should the system reverse the depreciation expense, when the asset is disposed.

The financial entry that is getting passed currently is as below: (let us say the asset was acquired for 100, and accumulated dep for 1st month is 10 and then the asset is sold on the 1st day of 2nd month for 125, so the net gain is 35.

Dr. Accounts receivable 125
Dr. Accumulated depreciation 10
Cr. Depreciation expense 10
Cr. Fixed Asset 100
Cr. Gain 25

Instead of the above, system should pass the entry as below:
Dr. Accounts receivable 125
Dr. Accumulated depreciation 10
Cr. Fixed Asset 100
Cr. Gain 35

What is your disposal convention set to? What is your depreciation method set to Annual or Monthly?

What SP are you on in Baan 5C? Which version of 5C are you running?

Hi

Average Convention used is 'period in service'. depreciation rate is set to monthly. we are on SP 10 and using Baan V c4. Where can I find disposal convention?