Depreciation Schedule and Why You Need It
Business or company has fixed costs that are always similar, regardless of the amount of sales or product. This cost is from the asset or capital that you have since started a business. The examples of assets are machinery, vehicle, land, property, and building. They do not look different per year, but the value is completely depleted. It is called depreciation. You know how much the value that’s still available from the depreciation schedule.
The schedule calculates and estimates the value based on a certain method. Even though the value is directly at your cash flow, calculating the depreciation is important for a business plan. More about this topic will be explored in the following sections.
Why Depreciation Schedule Is Necessary?
A common question you should ask is why the depreciation schedule necessary. You might buy the car two years ago. You drove it around and sometimes you went on long journey. That car is still in good condition today. However, the value is completely not at an equal level since the first time you had the car. This is a common example of deprecation.
- The expense from the depreciation process
When the value of things or asset is down, the accounting must be put into balance. This is mostly called as an expense since the business loses money after utilizing that asset. The depreciation process has expense, and the schedule explains the calculation.
- Business report
The business report involves many aspects. One of them is a value or remaining assets or property. Of course, the value is estimated to be lower than the previous year. Machinery, factory, vehicle are for production and business. Therefore, they have less value per year.
- Profit estimation
You can calculate depreciation as an expense and compare it to the overall revenue you earn. From this schedule, the company can estimate profit and sales. If the factory increases production, the business generates more sales but reducing the factory value.
Examples of Depreciation Schedule
A depreciation schedule is available in some structure. You can check the below list to know most of the schedules you will find.
- Business depreciation
- Asset depreciation schedule
- Properly depreciation
- House depreciation
- Land depreciation
- Yearly depreciation
Business depreciation is the most common schedule in the above list. It is a versatile structure that’s capable to integrate into the majority of business. For small companies, depreciation does not have complex calculations. Other schedules are property and asset depreciation. Both sound similar, but they are in different categories. The assets include property, machinery, logo, employee, method, and money.
For property, the business includes land, building, apartment, and storage. Of course, the type of property depends on what business you have. Land and storage are enough for small businesses. The big company has more property and buildings.
The last schedule uses time as a basis. Mostly, deprecation is calculated based on yearly value. You find that every year value will be reduced. Some companies use monthly and semester for this schedule.
Depreciation Schedule Method
Depreciation has several methods that you should check-in schedule. One asset may use two methods for a different purposes. The simples one is called a straight line. It uses a percentage from the existing value per year.
Another one is the activity method that utilizes how much the activity and production asset. In this case, more productions reduce the capability, and the depreciation schedule will calculate differently per year.