What Is an Itemized Depreciation Schedule?
Depreciation is the loss in value of a particular asset. It is the way in which accountants account for the loss in value of an asset due to usage. A depreciation schedule gives the depreciation expense and current book value (at the very least) for each asset instead of a gross total.
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Methodology
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There are several types of depreciation methodologies. The most common is the straight line method, which writes off equal portions of the asset's value every year until the value of the asset is completely written off.
Calculation
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The calculation for depreciation expense using the straight line method is the cost of the asset divided by the useful life of the asset. The useful life is determined by the buyer and is the number of years the asset can create income or revenue.
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Book Value
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The depreciation expense (cost/useful life) is deducted from the the book value of the asset. The result is the new book value of the asset.
Contra Account
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A contra account called accumulated depreciation is created to hold the write-off value. That is, as the book value of the asset drops in value due to depreciation, accumulated depreciation increases in value.
Reporting
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An itemized depreciation report lists the Asset ID, depreciation expense, accumulated depreciation, useful life and current book value for each asset which is eligible for depreciation.
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References
- Photo Credit A young woman holding a pen, doing her taxes image by Christopher Meder from Fotolia.com
