Fixed Asset Transactions
The three core fixed asset transactions: acquiring an asset, depreciating it over time, and disposing of it when it's no longer needed. Each creates specific GL entries you need to know for the exam.
The three stages of a fixed asset’s life
Think of buying a car.
You pay $30,000 at the dealership — that’s the acquisition. Every year the car loses value. After one year it’s worth $25,000, after two it’s $20,000. That decline is depreciation. Eventually you sell the car for $12,000 or scrap it — that’s the disposal.
Every fixed asset in Business Central goes through those same three stages: buy it, watch it lose value, then get rid of it. Each stage creates journal entries that hit the General Ledger.
Sam at Nordic Manufacturing does this all the time — buying CNC machines, depreciating them each month, and selling old ones when they’re replaced.
Acquiring a fixed asset
When your company buys a fixed asset, you need to record the purchase in Business Central. There are three ways to do this, depending on the situation.
Method 1: Purchase Invoice (most common)
This is how Sam buys most equipment. He creates a regular purchase invoice from a vendor, but instead of selecting an item, he selects Fixed Asset as the line type and picks the asset card.
What happens when you post:
- A vendor ledger entry is created (you owe the vendor money)
- An FA ledger entry is created with Entry Type = Acquisition Cost
- GL entries post: Debit FA Acquisition Cost account, Credit Accounts Payable
Method 2: FA Journal
Use the Fixed Asset Journal when there’s no vendor involved — for example, a donated asset, a transfer from another company, or correcting an acquisition amount.
Steps: Search for Fixed Asset Journals → select the depreciation book → enter the asset number, posting date, and amount with Document Type = blank and FA Posting Type = Acquisition Cost → Post.
Method 3: General Journal
The General Journal gives you full control over which accounts are debited and credited. Olivia sometimes uses this when the acquisition involves split funding or needs custom account mapping.
Steps: Search for General Journals → set Account Type = Fixed Asset → enter the asset number → set the balancing account (bank, GL, or vendor) → Post.
| Method | When to Use | Creates Vendor Entry? | Key Steps |
|---|---|---|---|
| Purchase Invoice | Buying from a vendor (most common). Asset arrives with an invoice. | Yes — a payable is created in AP | Create purchase invoice → Type = Fixed Asset → select asset card → Post |
| FA Journal | Donations, transfers, manual corrections. No vendor involved. | No | Open FA Journal → select depreciation book → enter asset and amount → Post |
| General Journal | Complex scenarios: split funding, custom GL mapping, or when you need full control. | Only if you set the balancing account to Vendor | Open General Journal → Account Type = Fixed Asset → set balancing account → Post |
Exam tip: The FA card must exist before you acquire
You cannot create a fixed asset card through the purchase invoice — the asset card must already exist. Sam first creates the FA card (with class, subclass, depreciation book, and posting group assigned), then references it on the purchase invoice. If the card does not exist, the acquisition will fail.
Depreciating a fixed asset
Depreciation spreads the cost of an asset over its useful life. You don’t expense the full $50,000 machine in the month you buy it — you spread it across the years you use it.
The Calculate Depreciation batch job
Business Central does not depreciate assets automatically. You must run the Calculate Depreciation batch job to generate depreciation journal lines.
How it works:
- Search for Calculate Depreciation
- Select the depreciation book (e.g., COMPANY)
- Set the posting date (typically the last day of the month)
- Set filters if needed (specific assets, classes, etc.)
- Click OK — Business Central calculates depreciation for each asset based on its method, useful life, and any salvage value
- The batch job creates journal lines in the Fixed Asset G/L Journal — it does NOT post them automatically
- Review the lines, then Post the journal
GL entries for depreciation
Each depreciation posting creates:
| Debit | Credit |
|---|---|
| Depreciation Expense (income statement) | Accumulated Depreciation (balance sheet) |
The Depreciation Expense account reduces your profit for the period. The Accumulated Depreciation account is a contra-asset — it sits under the asset on the balance sheet and reduces the asset’s book value.
How often should you run it?
Olivia runs Calculate Depreciation monthly as part of her month-end close. This ensures each month’s financial statements reflect the correct depreciation expense. Some companies run it quarterly, but monthly gives more accurate periodic reporting.
Warning: Calculate Depreciation does not post automatically
A common mistake in the exam: candidates assume running Calculate Depreciation posts the entries. It does not. It only creates journal lines. You must open the Fixed Asset G/L Journal and post them manually. If you forget to post, your assets will show incorrect book values and your depreciation expense will be understated.
Disposing of a fixed asset
Eventually every asset reaches the end of its useful life — or you sell it before then. Disposal removes the asset from the books and records any gain or loss.
Two ways to dispose
Sale to a customer (Sales Invoice): When you sell the asset, create a sales invoice with Type = Fixed Asset. This creates a customer receivable and records the disposal.
Scrap or write-off (FA Journal): When the asset has no sale value — it’s broken, obsolete, or worthless — use the FA Journal with FA Posting Type = Disposal.
GL entries for disposal
Disposal is the most complex FA transaction because it reverses everything and captures the difference:
| Entry | Debit | Credit |
|---|---|---|
| Remove acquisition cost | — | FA Acquisition Cost (removes the original cost) |
| Remove accumulated depreciation | Accumulated Depreciation (clears the running total) | — |
| Record sale proceeds (if sold) | Bank or Accounts Receivable | — |
| Gain on disposal (if sale price exceeds book value) | — | Gains Account on Disposal |
| Loss on disposal (if book value exceeds sale price) | Losses Account on Disposal | — |
The book value at disposal = Acquisition Cost minus Accumulated Depreciation. If the sale price is higher than book value, you have a gain. If lower, you have a loss. If you scrap it with no proceeds, the entire remaining book value is a loss.
Sam scraps a piece of equipment that originally cost 8,000 and has accumulated depreciation of 6,500. There are no sale proceeds. What is the result?
Complete lifecycle example: Sam’s CNC machine
Let’s follow one asset through all three stages with real numbers. Sam buys a CNC machine for Nordic Manufacturing.
Asset details:
- Acquisition cost: 50,000
- Depreciation method: Straight-Line
- Useful life: 5 years
- Salvage value: 0
- Annual depreciation: 50,000 / 5 = 10,000 per year
- Sam sells the machine after 3 years for 25,000
Stage 1 — Acquisition (Year 0)
Sam creates a purchase invoice from the machinery vendor:
| Account | Debit | Credit |
|---|---|---|
| FA Acquisition Cost (1600) | 50,000 | |
| Accounts Payable (2100) | 50,000 |
Balance sheet impact: Fixed Assets = 50,000. The machine appears on the books at full cost.
Stage 2 — Depreciation (Years 1, 2, and 3)
Olivia runs Calculate Depreciation at the end of each year. Each year produces:
| Account | Debit | Credit |
|---|---|---|
| Depreciation Expense (8100) | 10,000 | |
| Accumulated Depreciation (1610) | 10,000 |
After 3 years of depreciation:
| Running Total | Amount |
|---|---|
| Acquisition Cost | 50,000 |
| Accumulated Depreciation (3 x 10,000) | 30,000 |
| Book Value | 20,000 |
The machine still shows 50,000 in the acquisition cost account, but 30,000 of accumulated depreciation brings the net book value down to 20,000.
Stage 3 — Disposal (End of Year 3)
Sam sells the machine to another company for 25,000. Book value is 20,000, so there is a gain of 5,000.
| Entry | Account | Debit | Credit |
|---|---|---|---|
| Remove original cost | FA Acquisition Cost (1600) | 50,000 | |
| Clear accumulated depreciation | Accumulated Depreciation (1610) | 30,000 | |
| Record sale proceeds | Accounts Receivable | 25,000 | |
| Record gain on disposal | Gains on Disposal (8210) | 5,000 |
Check the math: Debits = 30,000 + 25,000 = 55,000. Credits = 50,000 + 5,000 = 55,000. Balanced.
After disposal, the CNC machine is completely removed from the balance sheet. The 5,000 gain appears on the income statement for that period.
Exam tip: Disposal entries must balance
The exam loves to test disposal GL entries. Remember the pattern: remove the acquisition cost (credit), remove accumulated depreciation (debit), record proceeds (debit), and the plug is either a gain (credit) or loss (debit). The gain/loss is simply the difference between what you sold it for and what the books say it was worth.
A fixed asset was acquired for 40,000, has accumulated depreciation of 32,000, and is sold for 5,000. What is the disposal result?
Summary: GL entries at a glance
| Transaction | Debit | Credit |
|---|---|---|
| Acquisition | FA Acquisition Cost | Bank or Accounts Payable |
| Depreciation | Depreciation Expense | Accumulated Depreciation |
| Disposal (remove cost) | — | FA Acquisition Cost |
| Disposal (remove depreciation) | Accumulated Depreciation | — |
| Disposal (proceeds) | Bank or Receivables | — |
| Disposal (gain) | — | Gains on Disposal |
| Disposal (loss) | Losses on Disposal | — |
Olivia runs the Calculate Depreciation batch job on 31 January. She checks the Fixed Asset G/L Journal and sees the correct lines. What must she do next?
🎬 Video coming soon
🎉 Congratulations — you’ve completed the entire MB-800 study guide!
You’ve worked through all four domains across 28 modules:
- Domain 1: Set Up Business Central — company creation, security, dimensions, approval workflows, data migration, and integrations
- Domain 2: Configure Financials — chart of accounts, posting groups, journals, bank accounts, currencies, AP, AR, fixed asset setup, and depreciation
- Domain 3: Configure Sales and Purchasing — inventory setup, costing methods, pricing, customers, vendors, sales processing, and purchase processing
- Domain 4: Perform Business Central Operations — financial documents, payments, bank reconciliation, and fixed asset transactions
You’ve met Priya, Olivia, Raj, Sam, and their teams. You’ve seen Business Central through the eyes of a consultant, a finance manager, an operations lead, and an IT admin.
What’s next? Practice in a sandbox environment, review the flashcards, retake the quizzes, and when you’re ready — book that exam. You’ve got this. 💪