Fixed assets are tangible pieces of property owned by a company that cannot be converted into cash in the short-term. Some examples of this type of asset include tangible properties, office equipment, machinery, and even patents. It is common that these assets lose their value over time, despite their use, or lack thereof. So then, what is fixed asset depreciation?
You may be interested in our entry: Basic glossary to understand accounting procedures.
Knowing the depreciation of your fixed assets will help you avoid unnecessary expenses by renewing these on time.
You have probably asked yourself more than once about the useful life of a tangible property or equipment you have just acquired, and more importantly, about the success of this investment. By knowing the depreciation of your fixed assets, you can solve these doubts.
There are numerous methods by which you can calculate depreciation, such as the straight-line or the units of production methods. The former focuses on both monthly and annual depreciation, whereas the latter looks at equipment and machinery. The results from the units of production method is obtained by knowing the cost of the asset and its expected lifetime production. The units produced within a month is determined. Then, the original cost of the equipment is divided by said estimate of units produced.
The following are the three most important benefits of managing depreciation:
- Being aware of the requirements and necessities to properly manage your assets.
- Knowing your assets in detail, such as their current state.
- Making the best decisions in relation to your investments in these assets.
These are only some of the advantages of properly managing depreciation. This way, you will be able to make informed decisions related to your company. Remember that you should always seek advice from experts in the field who can guide you through these processes.
At QuAdrans Law and Finance, we offer the accounting service, one of our most important and far-reaching services, through which we help you calculate the depreciation of your fixed assets. Contact us to learn more about this service. Our certified public accountants will provide you with on-point advice.
