Chapter20

CALCULATING

ASSET

DEPRECIATION

ContentsTangibleassetsIntangibleassetsCapitalexpenditureRevenueexpenditureDepreciationStraight-linemethodUnits-of-productionmethodDouble-declining-balancemethodSum-of-yeardigitsmethodEndingofassetThedepreciationofintangibleassets

Profits,losses,revenues,expenses;financialdataarevitaltoeverybusiness.Nocompanycansucceedwithoutgatheringthesedata,analyzingthem,andexplainingwhattheymean.Onetypeofthefinancialdataisassetvalue.Whenacompanyreportstotherelativeorganizationsofitsassets,theaccountantofthecompanyneedstoknowhowtocalculatethedepreciationofthecompanysassets.Insomecompanies,theaccountantsworkunderthesupervisionofanexecutivesecretary.Therefore,itisnecessaryforaseniorsecretarytohavetheknowledgeabouthowthedepreciationiscalculated.

Therearetwokindsofassets:Tangibleassetsandintangibleassets.Therearealsotwokindsofexpenditureswhicharerelatedtoassets.

To?account?forsomethingmeans?tokeeparecordofsomethinginyourbusinessbyusingtheaccountingsystem.Thereareusuallytwotitlesforthepeoplewhoworkintheaccountingdepartments:Accountantandbookkeeper.

TangibleassetsTangibleassetsarealsocalledfixedassets.Atavideoproductioncompany,forexample,thefixedassetsincludethecompanysbuildings,computersandsoftwareusedforediting,videocameras,anddigitaltaperecorders.

IntangibleassetsIntangibleassetsarenotphysicalassets.Youcannottouchorseethem,buttheyarejustasimportanttoabusiness.Forexample,thecompanyownsthecopyrightonmanyofthetelevisionprogramstheyhavemade.Acopyrightisavaluableintangibleasset.

CapitalexpenditureTangibleassetscostmoney,andmoneyspentonatangibleassetiscalledacapitalexpenditure.Capitalexpendituresincludethemoneytopurchaseanassetandalsothefreightexpensestoshiptheasset