Depreciation – Loan

Depreciation is an expression of the fact that the value in use of assets only partially enters into the actual product. Scheduled depreciation includes the amount of money at which the impairment is caused by aging, consumption or use. Unscheduled depreciation results in depreciation due to unforeseeable events, such as accidents. In addition to the “normal” wear and tear, the extraordinary wear is a reason for the depreciation. Limited rights, technological progress and price fluctuations in the market also lead to depreciation. Whatever type of depreciation is made, this always leads to a profit-reducing expense in the income statement. This ensures that a share of the proceeds is not distributed as profit, but is kept ready for the replacement investment.
Due to the fact that there are different variants of the depreciation, the sum of the depreciations, ie the acquisition and production costs , which are indicated in the balance sheet, and after the deduction of the residual value, should correspond as exactly as possible to the indicated depreciation, which refers to the periods of the Useful life have been divided. Depreciation is always a distribution of one-time costs, ie the cost of manufacturing, for assets used over a number of years.

Depreciation – the faster, the better

Depreciation - the faster, the better

It should be achieved by the process that the cost is distributed evenly. It would be optimal to allocate the cost consumption to the income generated by the asset. It can be chosen whether a depreciation is made linear, that is annual, or degressive, with an annual percentage . It is also allowed a so-called arithmetic, degressive depreciation.
The transition from the linear method to the declining balance method is permissible if the declining balance depreciation is less than that of the linear method. However, degressive depreciation is not allowed if the percentages are increasing.
Start of depreciation is always the point in time when the operational readiness of an asset is carried out. Usually it is the date of purchase or the day of purchase or delivery. Depreciation of immovable property takes place upon acceptance or handover. It is always calculated monthly.
The end of depreciation is the elimination, loss, scrapping or sale of the asset. Until this time, a write-off must always be made.