Depreciation of fixed assets is the process used by enterprises in accounting treatment to allocate the cost of fixed assets to various accounting periods over their useful lives. Here is a detailed explanation of the four main depreciation methods:
Averaging method (straight-line method):
Formula: Annual Depreciation Rate = (1 - Estimated Net Residual Value Rate) Estimated useful life (years).
Monthly depreciation rate: Monthly depreciation rate = annual depreciation rate of 12
Monthly depreciation: Monthly depreciation = Original value of fixed assets * Monthly depreciation rate.
Application: The straight-line method is the most commonly used depreciation method and is suitable for depreciation calculations of a large number of fixed assets.
Workload Method:
Calculation formula: Depreciation per unit of effort = Original value of fixed assets (1 - Estimated net residual value rate) Estimated total effort.
Monthly depreciation amount: Monthly depreciation amount = Monthly workload of the fixed asset * Depreciation amount per unit of workload.
Application: Applicable to fixed assets with unstable workload or difficult to **.
Double Declining Balance Method:
It is calculated as: Annual depreciation rate = 2 Estimated useful life (years).
Monthly depreciation rate: Monthly depreciation rate = annual depreciation rate of 12
Monthly depreciation: Monthly depreciation = net book value of fixed assets * monthly depreciation rate.
Application: The double declining balance method accelerates depreciation in previous years and is suitable for fixed assets that are expected to advance rapidly or have large intangible losses.
Sum of years method:
Calculation formula: Annual depreciation rate = Remaining useful life The sum of the number of years of expected useful life.
Monthly depreciation rate: Monthly depreciation rate = annual depreciation rate of 12
Monthly depreciation amount: Monthly depreciation amount = (original value of fixed assets - estimated net residual value) * monthly depreciation rate.
Application: The sum of years method calculates depreciation based on the proportion of the remaining useful life to the total service life, and is applicable to fixed assets with different expected useful lives.
Each method has its own specific application scenarios, and companies should consider factors such as the characteristics, usage, and expected benefits of fixed assets when choosing a depreciation method. In addition, different countries and regions may have different requirements for the selection of depreciation methods in accounting standards. When calculating the depreciation of fixed assets, the relevant accounting standards and regulations should be followed.