05-15-2006, 03:02 AM
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Fleety</i>
<br />Hi, straight line is easy
Car - £10,000 depreciated over 4 years to zero = £2,500 per month and it's gone
However how would I do the same calcualtion on reducing deprecation?
I need to come out at zero over 4 years but I come to £3164
My calc here is
£10,000
Less 25% = £7,500
£7,500
Less 25% = £5625
£5625
Less 25% = £4219
£4219
Less 25% = £3164 ! and not zero
Obviously I am missing the basics here however please tell me where I am going wrong!
Many thanks
Fleety
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
It is not necessary to bring your assetâs vale down to Zero when calculating depreciation unless your asset has scrap value ZERO at the end of its usage in your company/organisation. Anyway I donât think that you can bring your asset down to zero by using reducing method of depreciation (on NBV). Taking your example above, if you are willing to spread your cost of asset into its useful life then it isnât appropriate to use same % of Depreciation charge as straight line method. You can charge higher % of depreciation (ie. 35%) and whatever is left at the end of year 4 that would be its NBV and when you will dispose it you can treat the asset same as you treat it in when you make profit/loss on disposal of asset.
There is another reducing balance method of depreciation exit in which you can bring your assetâs vale down to zero But I donât want to mention that method here because you may get confused.
<br />Hi, straight line is easy
Car - £10,000 depreciated over 4 years to zero = £2,500 per month and it's gone
However how would I do the same calcualtion on reducing deprecation?
I need to come out at zero over 4 years but I come to £3164
My calc here is
£10,000
Less 25% = £7,500
£7,500
Less 25% = £5625
£5625
Less 25% = £4219
£4219
Less 25% = £3164 ! and not zero
Obviously I am missing the basics here however please tell me where I am going wrong!
Many thanks
Fleety
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
It is not necessary to bring your assetâs vale down to Zero when calculating depreciation unless your asset has scrap value ZERO at the end of its usage in your company/organisation. Anyway I donât think that you can bring your asset down to zero by using reducing method of depreciation (on NBV). Taking your example above, if you are willing to spread your cost of asset into its useful life then it isnât appropriate to use same % of Depreciation charge as straight line method. You can charge higher % of depreciation (ie. 35%) and whatever is left at the end of year 4 that would be its NBV and when you will dispose it you can treat the asset same as you treat it in when you make profit/loss on disposal of asset.
There is another reducing balance method of depreciation exit in which you can bring your assetâs vale down to zero But I donât want to mention that method here because you may get confused.
