What are the costs of depreciation?

depreciation costs are a percentage of the total value of a fixed asset that is determined to have been exhausted during a particular accounting period. The purpose of expenditure for depreciation is to gradually depreciate objects because they age and maintain wear and tear by regular use. Types of depreciation methods include a straight line, a sum of years, decreasing balance and production units. The item has been depreciated over the years of useful life to reflect the percentage of its value in each accounting period. Consume items are considered to be expenses at the time of purchase. For example, a piece of machine with an expected life of five years will be depreciated. The oil or seal used for machine maintenance is recorded as expenditures immediately because they are used only for a short time and then replaced. Cash payout occurs when the asset was purchased. In order to display a consistent profit statement and loss for the monthly accounting period, the annual depreciation is divided by twelve and published as monthly expenses.

The simplest method of depreciation is equal. The value of the less expected rescue value is divided by the number of years of the expected lifetime. For an asset with a five -year expected lifetime, depreciation costs will be 20% of the depreciable value each year.

Calculation of the Sum-of-the-Years-Digits method is based on fractional amounts. This depreciation method shifts higher costs for earlier years than the direct line method. For the asset with a flight, the depreciation is divided into fractional amounts based on the sum of the numbers for each year (1 + 2 + 3 + 5 = 15). The recorded depreciation is 5/15 value in the first year, 4/15 in the second year, etc. The

method of declining balance will move even more depreciation to the earlier periods. Usually, the double speed of direct line is envisaged and is therefore called the double -decreasing balance method. The formula for calculating the depreciation of a double decreasing balance in a given year is to deduct the collected depreciation from the originsRemoves values ​​and then divide in years of life and multiply two. The value of rescue is deducted in the last year.

Another method of depreciation is based on production units. This depreciation formula deducts the value of the rescue from the original value and then is divided by the overall expected production units and multiplication by the actual number of production units of the period. This method combines depreciation costs recorded at the actual level of production for the period of accounting.