What is depreciation of fixed assets and intangible assets?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Sometimes you can hear the question of what is depreciation. The very word "depreciation" has foreign roots. It is of Latin origin and literally means "repayment". In Russian, this term is used in two meanings: mechanical and financial. Redemption can mean a decrease in action and a gradual process.

Let's take a closer look at what depreciation is. An enterprise or an individual entrepreneur buys objects necessary for the production of their products, which have a long service life. Over time, equipment or buildings wear out, and the company recoups its losses by including the amount of wear and tear in the price of the goods and services produced.

The question of what depreciation is can excite businessmen who are just starting their way in business. Depreciation is an accounting concept. It means the annual write-off of a partial cost of fixed assets and intangible assets as they wear out on the production cost of products or services.

Individualan entrepreneur or the head of a large enterprise must know what depreciation and depreciation are, in order to properly plan their expenses. Depreciation is the amount of depreciation in monetary terms, which corresponds to the depreciation of fixed assets. This is a tax that is accumulated in the state fund. It is created by monthly depreciation according to the established norms.

Depreciation is not charged on objects whose life is less than a year, and their price is less than the established limit. They are classified as working capital. Fixed assets of enterprises financed from the state budget of the country are not depreciated.

Depreciation of fixed assets and intangible assets in accounting is calculated in the following ways:

- linear;

- including diminishing balance;

- write-off of the cost of the total amount of years of operation;

- writing off the cost in proportion to the output.

All property of enterprises is distributed into certain depreciation groups, in which fixed assets and intangible assets are assembled according to their useful life.

An enterprise or an individual entrepreneur can use one of the depreciation methods for tax purposes: linear or non-linear. In this case, you can use different accrual methods for fixed assets.

For some groups, an enterprise oran entrepreneur will be able to use a linear method, for the rest - a non-linear one. Depreciation can also be accrued both by the accelerated method and by the delayed one.

Amounts of deductions are included in the cost of production and, accordingly, are transferred to the price of goods or services. Enterprises accumulate these funds in a special fund. The use of depreciation from the depreciation fund is possible only for the renewal or restoration of fixed assets after the expiration of their service life.