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© In
stitu
to In
tern
acio
nal S
an T
elm
o, 2
012
DEPRECIATION
E-LEARNING COURSE: ACCOUNTING & FINANCES
DEPRECIATION
THANK YOU FOR YOUR INTEREST!!!!
Yes, a year has gone by.
Does this have any impact on the company that you might have overlooked and should now be recorded?
Let’s have a better look at this issue…
DEPRECIATION
Jan. 01, 2012
The passing of time...…also affects what things a company has… Because things are used they wear out...
Dec. 31, 2012
1 YEAR!!!
Building (warehouse and office space)
Equipment
Furniture
Assets in use during 2012
Deeds and incorporation
STRAIGHTFORWARD, right? But...
How long will assets last?
How is this event converted into EUR?
How is this “wearing out” recorded in accounting terms?
DEPRECIATION
You buy it on Jan. 01, 2012 for €1,000
Let’s look at an example: A computer
Time passes... 5 YEARS
OUT
Its value after 5 years €0
ANCPN
ACPNC
PC
Computer
ANCPN
ACPNC
PC
ComputerX
5 years
How does this happen?
Compra
Año 1 Año 2 Año 3 Año 4 Año 50 €
200 €
400 €
600 €
800 €
1,000 €
1,200 €
All in year 1, nothing in subsequent years
Compra
Año 1 Año 2 Año 3 Año 4 Año 50 €
200 €
400 €
600 €
800 €
1,000 €
1,200 €
All in year 5, nothing in previous years
Spread throughout the 5 years at €240 each year
Compra
Año 1 Año 2 Año 3 Año 4 Año 50 €
200 €
400 €
600 €
800 €
1,000 €
1,200 €
Year 1 2 3 4 5Year 1 2 3 4 5
Year 1 2 3 4 5
DEPRECIATION
You buy it on Jan. 01, 2012 for
€1,000
We would naturally… “spread it throughout the 5 years” so long as intensity of use is similar…
Time passes... 5 YEARS
OUT
Its value after 5 years €0
NCANE
CANCL
CL
Computer
NCANE
CANCL
CL
ComputerX
All spread throughout the years at €240 each year
Compra
Año 1 Año 2 Año 3 Año 4 Año 50 €
200 €400 €600 €800 €
1,000 €1,200 €
In accounting, this is calledDEPRECIATION
Year 1 2 3 4 5
© In
stitu
to In
tern
acio
nal S
an T
elm
o, 2
012