Understanding FormulaBased Depreciation Methods Concept Understanding FormulaBased Depreciation
Understanding Formula-Based Depreciation Methods Concept
Understanding Formula-Based Depreciation Methods
Understanding Formula-Based Depreciation Methods Step 1 In People. Soft Asset Management, you use various formula-based methods for calculating depreciation. These methods are listed in the list on the screen.
Understanding Formula-Based Depreciation Methods Step 2 You calculate the Yearly Straight Line depreciation using the formula shown on the screen.
Understanding Formula-Based Depreciation Methods Step 3 The Declining Balance with a Switch to Straight Line method performs two simultaneous equations to calculate yearly depreciation. One equation calculates declining balance depreciation and the other calculates straight-line depreciation. People. Soft Asset Management enables you to compare the two yearly depreciation amounts and applies whichever is greater than the other.
Understanding Formula-Based Depreciation Methods Step 4 The Declining Balance with Depreciation Limit method enables you to specify annual depreciation limits based on the percentage of an asset's cost. This method runs three calculations and performs comparisons between the results. The greater amount in this final comparison is the annual depreciation amount.
Understanding Formula-Based Depreciation Methods Step 5 The formula for calculating the Flat Rate depreciation is displayed on the screen.
Understanding Formula-Based Depreciation Methods Step 6 The Flat Rate depreciation method can be combined with either a monthly or yearly averaging option. When these options are used, People. Soft Asset Management uses three separate formulas to calculate depreciation for adjustments.
Understanding Formula-Based Depreciation Methods Step 7 These formulas are used for calculating additional depreciation resulting from adjustments to the average balance. In the averaging option, all adjustment transactions take effect from the beginning of the year to its end.
Understanding Formula-Based Depreciation Methods Step 8 The Units of Production depreciation method differs from other methods in that it does not depreciate an asset based on its periods of life, but rather on its production detail. In this method, an asset is assumed to have a fixed lifetime production capacity. Therefore, a fixed amount of depreciation is allotted to each unit of production. The net book value of the asset is then multiplied by the number of units produced in a period over the remaining units to be produced to determine how much depreciation to take for that period.
Understanding Formula-Based Depreciation Methods Step 9 You have learned about various formulas used to calculate yearly depreciation for each method. End of Procedure.
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