Sometimes you can hear the question of what depreciation is. The word "depreciation" itself has foreign roots. It is of Latin origin and literally means "repayment." In Russian, this term is used in two meanings: in mechanical and financial. Repayment may mean a decrease in the action and gradualness of a process.
Let us consider in more detail what depreciation is. An enterprise or an individual entrepreneur buys objects necessary for the production of their products, which have a long service life. Over time, equipment or buildings wear out, and the company compensates for its losses by laying in the price of goods and services produced the amount of their wear.
The question of what depreciation is may concern businessmen who are just starting their journey in business. Depreciation is an accounting concept. It means the annual write-off of the partial value of fixed assets and intangible assets as they depreciate on the production cost of products or services.
An individual entrepreneur or the head of a large enterprise should know what depreciation and depreciation are for properly planning their expenses. Depreciation is the depreciation in monetary terms, which corresponds to the depreciation of the asset. This is a tax that is accumulated in the state fund. It is created by monthly depreciation charges in accordance with established standards.
Depreciation is not charged on objects whose service life is less than a year, and their price is less than the established limit. They are classified as working capital. Fixed assets of enterprises financed from the state budget of the country are not depreciated.
Depreciation of fixed assets and intangible assets in accounting is accrued in the following ways:
- linear;
- taking into account the reduced balance;
- write-off of the value for the total amount of years of the service life;
- write-off of the value in proportion to the output.
All property of enterprises is allocated to certain depreciation groups, in which fixed assets and intangible assets are composed according to their useful life.
An enterprise or an individual entrepreneur may use one of the depreciation methods for tax purposes: linear or non-linear. At the same time, different accrual methods can be used for fixed assets.
For some groups, the enterprise or entrepreneur will be able to use the linear method, for the rest - non-linear. Depreciation can also be accrued both on an accelerated basis and on a delayed basis.
The amounts of deductions are included in the cost of production and, accordingly, are transferred to the price of goods or services. Enterprises accumulate these funds in a special fund. The use of depreciation from the depreciation fund is only possible to update or restore fixed assets after the expiration of the service life.