What is the depreciation of fixed assets?

Depreciation of fixed assets allows you to pay off the cost of objects belonging to the number of fixed assets.

It's no secret that fixed assets wear out during the operation of the enterprise, their initial cost is reduced. Over time, each company has a need to replace existing funds with new, more sophisticated ones, or to carry out their reconstruction or modernization. In this context, one can even say that depreciation and amortization of fixed assets are interrelated. After all, the latter allows an enterprise to reimburse the spent money resources for the acquisition of the necessary fixed assets as the first one arises. One can even say that depreciation of fixed assets is a specially developed method that allows parts to include the cost of these same funds in the costs that inevitably arise in the production of a particular product. Then these resources can be directed to the reimbursement of consumed resources.

Depreciation of fixed assets can be accrued in various ways:

· Linear, during which the amount of depreciation is determined in accordance with the initial cost of the object, which, if necessary, is replaced with the restored value, and depreciation rates established by the useful life. The annual value is calculated;

· The method of decreasing balance, which allows calculating the amount of depreciation charges for the year, depending on what the residual value at the moment and the useful life of the facility, as well as on the basis of the factor established by the enterprise;

· By way of the sum of annual numbers. In this case, the annual amount of the depreciation deductions to be formed is determined in accordance with the initial value of the object, which, if necessary, is replaced with the restored value, and the coefficient calculated as the quotient of the remaining period and the entire useful life of the object;

· In proportion to the volume of products produced at the enterprise. In this case, the natural indicator of the volume of manufactured products during the reporting period and the coefficient determined as a quotient of the initial cost of the object and the estimated volume of output that the enterprise can make for the entire useful life of the object belonging to the fixed assets of the enterprise is applied.

The useful life used in the above calculations, each enterprise or organization can establish independently, depending on what will be:

· The expected period of use of the facility, consistent with the expected performance or capacity;

· Physical depreciation, depending on the planned operation mode;

· Period of use, established by regulations and other documents, for example, a lease agreement.

This parameter can be reviewed after changing the main parameters or characteristics of the object, if it is reconstructed or upgraded.

It is worth noting that the tax code establishes a list of objects for which depreciation of fixed assets is not calculated. These include objects that do not change their properties and parameters over time.

Depreciation of fixed assets is always accrued after the acceptance of the object for accounting from the first day of the month, which follows. The end of these accruals will be the month following the date when the payment of the object's value will be fully effected or it will be written off from the accounting records.