PURPOSE

Every department, regardless of size, needs to employ and account for depreciation — particularly if that department manages assets such as laptops, servers, and production machinery. How else are you going to know when it’s time to purchase new equipment? With the help of this worksheet from TechRepublic Premium, you’ll be able to calculate standard depreciation using the method that best fits your needs.

Mention depreciation in a conversation, and everyone’s eyes are likely to glaze over. But that reaction is somewhat misplaced. Depreciation is not a hard concept to grasp. To put it in its most simple terms, the more you use something, the less valuable it becomes.

In business, depreciation measures how much and how fast an asset loses value. As the value decreases, the business can deduct that amount as an expense against revenue. It allows them to express the results of their financial transactions more fairly and accurately.

How do you calculate depreciation?

When it comes to choosing a depreciation method, timing is everything. This worksheet will calculate standard depreciation using various methods, each with its own benefits and drawbacks. The calculation methods used include:

• 200% Declining Balance — Twice the straight line method on the remaining asset value, switching to straight line during the year that method becomes more beneficial.
• 150% Declining Balance — One and a half times the straight line method on the remaining asset value, switching to straight line during the year that method becomes more beneficial.
• Straight Line — Dividing the cost evenly over the useful life of the asset.
• MACRS General (U.S. Federal Tax) — Similar to DDB, but the depreciation expense is mandated by legislation and IRS regulations.
• Alternative Method (Federal Tax) — Similar to the MACRS General method, but expense is slower in the beginning to reduce the tax reduction benefit for alternative minimum tax purposes.
• Section 179 Deduction (Federal Tax) — The full cost of an asset up to $500,000 can be taken as a deduction in the first year of service; the remaining balance is depreciated over the remaining life.