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Depreciation Presentation Updated

The document provides an overview of depreciation, including its definition, significance, causes, and methods. It outlines key terms related to depreciable assets and explains various depreciation methods such as Straight-Line and Declining Balance. Additionally, it discusses the accounting implications of depreciation and its impact on taxes.

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gohil202425
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27 views15 pages

Depreciation Presentation Updated

The document provides an overview of depreciation, including its definition, significance, causes, and methods. It outlines key terms related to depreciable assets and explains various depreciation methods such as Straight-Line and Declining Balance. Additionally, it discusses the accounting implications of depreciation and its impact on taxes.

Uploaded by

gohil202425
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Understanding Depreciation

• Concepts, Methods, and Applications


• Presented by: [Your Name]
• Date: [Presentation Date]
Introduction to Depreciation
• • Allocation of asset cost over useful life
• • Reflects value reduction due to wear, age,
obsolescence
• • Matches expenses with revenues
Why Depreciation Matters
• • Accurate profit calculation
• • Tax deduction benefits
• • Asset valuation
• • Budget planning
Causes of Depreciation
• • Wear and Tear: Regular use leads to physical
deterioration
• • Passage of Time: Aging affects asset
efficiency
• • Obsolescence: Technological advancements
make assets outdated
• • Depletion: Natural resource extraction
reduces asset value
• • Accidents or Damage: Unexpected events
can reduce value
Depreciable Assets
• • Tangible assets like buildings, machinery,
vehicles
• • Useful life > 1 year
Key Terms
• • Cost: Total paid for asset
• • Salvage Value: Estimated end value
• • Useful Life: Expected productive period
• • Depreciable Base: Cost - Salvage Value
Methods of Depreciation
• • Straight-Line
• • Declining Balance
• • Double Declining Balance
• • Sum-of-the-Years-Digits
• • Units of Production
Straight-Line Method
• • Equal expense yearly
• • Formula: (Cost - Salvage Value) / Useful Life
• • Simple and widely used
Straight-Line Example
• • Cost: $10,000
• • Salvage: $2,000
• • Life: 4 years
• • Annual Depreciation = $2,000
Declining Balance Methods
• • Accelerated depreciation
• • Higher early year expenses
• • DDB Formula: 2 × SL Rate × Book Value
Units of Production Method
• • Based on asset usage
• • Formula: (Cost - Salvage) × (Usage / Total
Usage)
• • Ideal for manufacturing
Accounting for Depreciation
• • Depreciation Expense (Income Statement)
• • Accumulated Depreciation (Balance Sheet)
• • Reduces asset book value
Tax and Depreciation
• • Different methods for tax (e.g., MACRS)
• • Reduces taxable income
• • May differ from financial reporting
Change in Estimates
• • Life/salvage value can change
• • Prospective application
• • No prior restatement
Depreciation vs Others
• • Depreciation: Tangible assets
• • Amortization: Intangibles
• • Depletion: Natural resources

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