Depreciation

Depreciation is a term used in accounting and finance to spread the cost of an asset over the course of several years or a period of time. 

Depreciation in relation to fixed assets is the allocation of an asset’s purchase cost, across its functional life, relating to normal wear and tear. The term is most often used when referring to assets with a fixed service life. Depreciation causes expenses to be recognized and therefore lowers reported profits on a company’s income statement; the asset’s net value subsequently declines on the balance sheet. Depreciation has a direct impact on an organization’s financial statements and taxes.

Often times, spreadsheets contain errors, which is to be expected with information entered manually. Whether the information is  the background asset data or the formula itself, there's little doubt that depreciation calculations, when based on a spreadsheet, are likely to be inaccurate. Several people within one department will often access, manage and edit the same spreadsheet, increasing the chance of errors.

A specialist fixed asset management system will eliminate costly depreciation errors. Depreciation formulas and asset lives can be defaulted for each book based on any defined asset category. Processing depreciation this way is both quick and easy, completed with just a click of a button.

« Back