Purchasing an Asset

Purchasing an asset in ERPNext involves creating the asset record, optionally automating asset creation from a purchase, and following the purchase and accounting cycle.

Assets can be purchased manually or automatically created when receiving an item in a Purchase Receipt or Purchase Invoice. This ensures accurate asset tracking and proper accounting entries.

1. Prerequisites

Before purchasing a new asset, ensure the following are configured:

• Asset Category is created
• Item is created with ‘Is Fixed Asset’ enabled
• Optional: Enable ‘Auto Create Assets on Purchase’ in the item master if you want assets to be created automatically upon receipt

Item Master

2. How to Purchase an Asset

1. Follow the standard purchase cycle for the asset:

• Create a Purchase Order (if required)
• Receive the item via Purchase Receipt
• Submit a Purchase Invoice

2. Enter the asset location in the Items table of the Purchase Receipt or Purchase Invoice.
3. On submission of the Purchase Receipt:

• If Auto Create Assets is enabled, ERPNext will automatically create the Asset record.
• You can then update other details manually in the Asset form.

2.1 Accounting Entries

1. With Capital Work in Progress (CWIP) Enabled

• On submitting the Purchase Receipt, the CWIP account is debited instead of the asset account.
• This represents that the asset is purchased but not yet available for use.
• When the asset becomes available for use, CWIP is credited, and the corresponding asset account is debited.

2. With CWIP Disabled

• The receipt entry is posted directly to the asset accounts defined in the Asset Category.

3. Temporary Liability Account

• ERPNext uses “Asset Received But Not Billed” (a liability account) when submitting a Purchase Receipt.
• On submitting the Purchase Invoice, this account is debited/reversed.

3. Related Topics

1. Purchase Receipt
2. Purchase Invoice