Fixed assets and depreciation in Firmify

What is a fixed asset?

A fixed asset is an item your company owns that has a useful life of more than one year and a value above the threshold set by your accounting policy — typically 700 BGN for small companies in Bulgaria.

Examples: laptops, servers, company vehicles, office furniture, machinery, software licences with multi-year validity.

Items below the threshold (e.g. a keyboard, a mouse, stationery) are recorded directly as an expense in account 601 (materials) or 602 (external services) when purchased.

Depreciation — the core concept

Fixed assets are not expensed all at once when purchased. Instead, their cost is spread over the asset's useful life through depreciation (амортизация):

• You pay 3 000 BGN for a laptop.
• Useful life: 3 years.
• Annual depreciation: 3 000 ÷ 3 = 1 000 BGN/year (straight-line method).
• Each month: 1 000 ÷ 12 = 83.33 BGN is recorded as an expense.

Bulgarian useful lives are guided by ZKORPD (the Corporate Tax Act) — the tax depreciation rates differ from accounting rates in some cases.

Standard depreciation rates (tax, ZKORPD)

You may use faster rates for accounting purposes; the difference is a deferred tax item.

Step by step in Firmify

Step 1: Record the purchase

When you receive the invoice for the asset:

1. Go to Accounting → Purchases → New Purchase
2. Record the invoice normally but select account 204 (Equipment) or 205 (Computers and equipment) in the line item — not 602.

The journal entry is:

Debit  204 Equipment              3 000.00
Credit 401 Suppliers payable      3 000.00

Step 2: Add the asset in Firmify

Go to Accounting → Assets → New Asset and fill in:

• Name — e.g. "MacBook Pro 14-inch"
• Category — Computer / Equipment / Vehicle / Other
• Purchase date — the invoice date
• Cost — the amount excluding VAT
• Useful life — in years (e.g. 3 years for a laptop)
• Depreciation method — Straight-line (most common for small companies)
• Residual value — usually 0 BGN

Click Save. Firmify calculates the monthly depreciation amount automatically.

Step 3: Run monthly depreciation

At month end, go to Assets → Run Depreciation for the open period. Firmify creates the depreciation journal entry for all active assets:

Debit  603 Depreciation expense   83.33
Credit 2041 Accumulated depreciation  83.33

This reduces the book value (carrying amount) of the asset on the balance sheet each month.

Step 4: Track the asset register

Go to Assets to see the full list:

• Purchase cost
• Accumulated depreciation to date
• Current book value (net book value)
• Remaining useful life

This is your fixed asset register — required for the annual financial report.

Step 5: Dispose of an asset

When you sell or write off an asset:

1. Go to the asset → Dispose
2. Enter the disposal date and any sale proceeds
3. Firmify records the disposal:
   • If sold at a gain: credit account 709 (Other income)
   • If written off at a loss: debit account 609 (Other expenses)

VAT on asset purchases

If you are VAT-registered, you can deduct the input VAT on asset purchases in the month of the invoice — even though the asset cost is spread over years. Record the purchase invoice in Purchases and the VAT is included in your VAT period automatically.