Results on Depreciation

The decrease in monetary value over time of the assets due to repeated use is measured as depreciation. In this context, the initiatives for calculating the monetary value of the assets are considered with the “Accelerated Depreciation” scheme. In addition to this, several types of calculating methods are used for measuring depreciation such as the “Straight Line method”, “Annuity Method”, “Fixed Percentage”, etc. The composite methods are included in the Miscellaneous method which depends on the time allocation arbitrary method. The selection of the best depreciation method depends on the calculation of the monetary values. 

Overview of depreciation 

The results of depreciation are achieved based on the usable calculation method for analyzing the gap between the actual and perceived monetary value of the assets. The acquisition value of assets is required for calculating the depreciation that has resulted in an expected rational value of the assets. In addition to this, the decrease of asset value caused unfavorable conditions over the usable time period. The estimated calculation of depreciation depends on the expected results of monetary values. For example, the property value is calculated for a taxation purpose in the assets of the market and real estate. 

Definition of depreciation

The calculation of financial value over a specific time period of such assets refers to the result of depreciation. In this regard, there are several aspects involved in the calculation of depreciation such as market value, real estate, etc. This often includes during the economic downturn, the depreciation is being calculated for the monetary value of financial services over a financial year. Every calculation method deals with several key factors for analyzing the annual depreciation such as the calculation method of the “Straight Line Method” is followed :

P = (X – Y) / t

Where, 

P = Annual Depreciation

X = “Cost of the assets”

Y = Rescue value

t = Estimated time period

Important factors of depreciation 

The result of depreciation is achieved through several important factors such as “Cost of the asset”, “Life of the assets”, “Expected residual value”, and “calculation method of depreciation”. The acquisition value of the asset is included in the “cost of the asset” for analyzing annual depreciation. In this context, the “life of the assets” refers to the time period in which the assets can be used appropriately. This also includes the rescue values calculated over the disposal of the assets to the end for determining the actual depreciation. 

Calculation methods of depreciation 

The useful calculation methods of depreciation for achieving a sustainable result are followed: 

• “Straight Line method”

• “Balance Method”

• “Digits Method”

• “Annuity Method”

• “Cash Flow Method”

The straight-line includes the method for calculating the assets over a uniform amount for a specific time period. This often includes the estimated repair cost of the assets for determining the results of depreciation. For calculating the repair cost, the annual depreciation can be achieved as follows:

P = (A – D + C) / t

Where, 

P = Annual Depreciation 

A= Cost

D = Estimated rescue value

C = Cost of repairs

t = Estimated life of assets

The time period of assets life allows the calculation of the rescue value of the asset cost for determining the annual depreciation. In this regard, the value of depreciation is determined based on the life of assets by considering the estimated rescue value of the assets. In order to calculate annual depreciation by digits methods, the following formula is used: 

D’ = [n (n + 1)] / 2 

Where D’ allows calculating the digit sum of 1 to n. 

The results of depreciation are also achieved through the determination of the lifetime of assets based on the usable time period. The actual value of depreciation is measured over the time period by the end of the asset. 

Selection of the best depreciation method 

The selection of the best depreciation method depends on the usable approach of the assets such as rational and systematic. For example, in order to calculate annual income, this is important to determine all the significant changes in the real effort and perceived value. The required variables for calculating the depreciation are also determined to calculate the depreciation value based on the formulas. 

Conclusion 

This has been concluded that the annual results of depreciation are determined based on various calculation methods. This often includes the appropriate variables for achieving the actual result of depreciation from different aspects. The selection of the best depreciation method is evaluated based on the usable approaches to calculating the acquired value of depreciation. All the important factors are discussed that are included in the calculation method of depreciation.