1. Creating a Depreciation Record
Click Depreciations from the left menu to open the following view:
On the depreciations page, you’ll find four columns that show depreciation info:
- Cost: Purchase cost of this asset.
- Current Value: Residual value of an asset.
- Monthly Depreciation: Depreciation value for the current month.
- Remaining: Depreciation value of all months from the started using date until now (The started using date is the purchase date).
The system calculates depreciation using the Straight-Line Depreciation Method.
Straight-line depreciation is a very common, and the simplest, method of calculating depreciation expense. In straight-line depreciation, the expense amount is the same every year over the useful life of a given asset.
The depreciation Formula for the Straight Line Method is:
[(Cost – Salvage value) / Number of months]
Salvage value default is 0
2. Straight-Line Depreciation Calculation Example:
Consider a piece of equipment that costs $25,000. The number of months that it has been used for up to this point is 8 years and the salvage value is $0. The year-to-year depreciation expense for this equipment would be as follows:
Depreciation Expense = ($25,000 – $0) / 8 = $3,125 per year.