DEPRECIATION SCHEDULE TEMPLATE AND METHODS
Here, you will learn about what depreciation schedule is and the methods for calculating depreciation, this is important in deciding which method to use before getting the depreciation schedule template.
The definition of Depreciation Schedule
The term Depreciation refers to the reduction of assets’ value over the years. A depreciation schedule is a document or a table showing the decreasing amount of the value of the asset along the life span of the assets. In accounting and tax, this is done by turning the cost into expense to increase the profitability of the assets.
A quantity surveyor will help to calculate the expenses and provide the depreciation schedule for the accountant then to deal with the taxes and regulations.
The types of methods of making depreciation schedule
There 4 main types of depreciation methods that are commonly used, they are Straight-line method, Double declining balance method, Units of production method, and the sum of years digits
Before you choose which type to use and what kind of depreciation schedule template you will get, let us see the methods one by one.
- Straight-line Depreciation Method
This is considered to be the simplest method and the most commonly used in calculating depreciation expenses. In this method of calculating depreciation, the amount of expense is constant every year. The information included in calculating with this method is the description of the asset, purchasing date, the cost, life expectancy, depreciation method, salvage value, current year depreciation, cumulative depreciation, and net book value. The formula for this method is Depreciation Expense = (Cost – Salvage value) / Useful life.
- Double declining balance method
This method uses the logic of the productiveness in the early years of the assets use is higher rather than the latter years. The calculation using this method resulting in more amount of expenses in the early years and much less in the later years. The formula is Periodic Depreciation Expense = Beginning book value x Rate of depreciation.
- Units of production method
This method calculates depreciation based on numbers of using hours in total through life if the asset. The formula is Depreciation Expense = (Number of units that has been produced / Life in number of units) x (Cost – Salvage value)
- Sum-of-the-Years-Digits Depreciation Method
This method is used if you want to accelerate the depreciation method. The formula is Depreciation Expense = (Remaining life / Sum of the digits of the years) x (Cost – Salvage value).
Now you can find the best depreciation schedule template after you learn about the methods in calculating depreciation.