Straight Contra
Straight Contra
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Straight run: oral history transcript : thirty-nine years driving a bus for the Alameda-Contra Costa Transit District / 2003
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DescriptionThis is a reproduction of a book published before 1923. This book may have occasional imperfections such as missing or blurred pages, poor pictures, errant marks, etc. that were either part of the original artifact, or were introduced by the scanning process... |
Depreciation- How to Use Each Method
Depreciation is a term Used in accounting or finance that means to spread the cost of an asset over the span of its depreciable life. In much more simpler terms, depreciation accounts for the reduction of an assets value over time through usage. The use of depreciation in the United States affects financial statements and the taxes of companies and individuals. When depreciation is recorded, an expense is recognized which therefore lowers stated income. The assets book value is also changed when depreciation is recorded because its book value is lowered by the depreciation expense recorded each year.
Depreciation for accounting and tax purposes can differ substantially. Depreciation also can be called amortization, which means the depreciation of intangible assets. Depreciation or amortization for accounting purposes will not affect the cash flow of a company, because it is not figured in the cash flow statement, and it may not be added back to net income to calculate the operating cash flow. Depreciation in accounting is used for two main purposes: to match its expenses with income, and to make sure the values assigned to each asset are not over or understated.
Depreciation for tax purposes however will affect the cash flow of a company. This is because tax depreciation reduces taxable profits, which will then increase any return. When depreciation is shown on financial statements, it usually doesn’t mean depreciation for tax purposes. Salvage value, is the net worth of an asset at the end of its useful life. Or in other words, it is the remaining value of an asset after depreciation.
In accounting, assets are recorded on their balance sheets at historical cost, or the original cost of the asset. Historical cost minus all depreciation expenses equals an asset’s salvage value. Depreciation is not taken out of each item individually; rather it is recorded in a contra-asset account, or credit balance asset account, called accumulated depreciation. The normal entry usually involves a debit to depreciation expense, and a credit to accumulated depreciation.
There are many methods for recording depreciation. Many are based on the passage of time or the amount the asset is used. Special accounting standards boards have guidelines on what methods you can and cannot use. One universal rule of recording depreciation expense for the year is depreciation base multiplied by the depreciation rate for that year. Straight line depreciation is the most common and simplest method of depreciation. This method expenses a portion of an assets original cost over the useful life of an asset. The depreciable life for each type of asset is also determined by the accounting standards board. Using straight line depreciation, you have the same depreciable rate each year which is determined by the assets useful life. Say an asset is worth $10,000 and has a useful life of 10 years and has $0 scrap value. The depreciation base will be $10,000 and the rate would be 10% (100%/10) which gives $1000 of depreciation expense for the year.
The next method is the declining balance method. This method is an accelerated depreciation method, because you take more depreciation in earlier years. Annual depreciation equals book value at beginning of year x depreciation rate. Using double declining balance, you always use double the straight line rate. So if an asset had a useful life of 10 years, your straight line rate would be 10%, but your declining balance rate would be 20%. So if an asset was worth $10,000 with a life of 10 years, you would multiply $10,000 by 20% giving you $2,000 in depreciation expense. Your book value at the end of next year will now be $8,000 ($10,000 - $2,000). So next years depreciation expense would be $8,000 x 20% which equals $1600 in depreciation expense for the year.
The sum of years digit method, results in more accelerated depreciation than straight line, but less than the double declining method. First calculate the years digits, if the asset has a useful life of 5 years, the years digits are 5,4,3,2,and 1 for each respective year. Next calculate the sum of the digits which equals 15 (5+4+3+2+1). Then calculate the rate for each year by taking its year’s digit and dividing by the sum of years digits. If an asset is worth $10,000, with a life of 5 years, you would multiply $2,000 by 5/15 which equals $666.66 of depreciation expense for the year. For year two, you would multiply $2,000 by 4/15 to come up with your depreciation expense for the year. The same calculations would continue until the asset is fully depreciated.
These are the simplest, most basic forms of depreciation. There are other methods which include unit of production, group, and composite depreciation which are more complicated than the methods shown in this article. I hope if used correctly, you can identify which type of depreciation you will use in your business or trade.
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New Dental Low Speed Handpiece Hand Piece kit, Motor,contra angle and Straight Nose inlcuded
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DescriptionThis kit includeds three pieces, motor,contra angle and straight piece. Three months warranty is from Canada. |
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New Dental Low Speed Handpiece Hand Piece kit, Motor,contra angle and straight nose inlcuded
Sale Price: $129.99 |
DescriptionThis kit includeds three pieces, motor,contra angle and straight piece. |
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Straight run: oral history transcript : thirty-nine years driving a bus for the Alameda-Contra Costa Transit District / 2003
List Price: |
DescriptionThis is a reproduction of a book published before 1923. This book may have occasional imperfections such as missing or blurred pages, poor pictures, errant marks, etc. that were either part of the original artifact, or were introduced by the scanning process... |
