مشاركة: Accounting for Assets
Depreciation
Buildings, computers, vehicles and machinery can only last so long before they need to be knocked down, traded in or simply disposed of. Depreciation is an expense that is distributed over each period of an assets estimated useful life and makes up a large portion of an entity’s annual expenses. The following depreciation methods are covered in this tutorial:
Straight line method: The straight line depreciation method is the most basic and thus the most commonly used depreciation method. It allocates an equal amount of depreciation expense over the assets estimated useful life.
Declining balance method: The declining balance depreciation method allocates a certain percentage of depreciation expense over the assets estimated useful life. Therefore, as time progresses, less and less depreciation is recorded in each period. This is a reasonable approach to take.
Sum of digits method: the sum of digits method allocates a greater amount of depreciation in the earlier years of the assets life. Depreciation is calculated as the book value multiplied by years remaining in the assets estimated life divided by the sum of digits.
Units of production method: The units of production depreciation method depreciates an asset on the bases of how much it is used, or rather, how many units of output the asset produces. The most common asset that is depreciated this way would be manufacturing machinery
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