Create Depreciation Simulations - Examples
This page contains some examples that illustrate how depreciation is calculated in the Assets module. The examples use an Asset with a Purchase Value of 50,000, a depreciation of 5% p.a. and a starting date of 1/1/2024.
Straight Line ModelA Straight Line Model will depreciate an Asset by the same amount each year, using its initial value (i.e. the purchase price) as the basis for the calculation.
Depreciation can only be calculated for periods shorter than one month in the following circumstances:
- You have specified in the Depreciation Model that depreciation is to be calculated daily and you selected the According to Model option when running the Maintenance function or when producing reports.
- You selected the Values per Day option when running the Maintenance function or when producing a report.
Otherwise, the period must be a number of whole months or years.
- Depreciation for 2024 (note: 2024 is a leap year)
- Period: 1/1/2024 - 31/12/2024
- Values per Day
- Depreciation for one day = 50,000.00 x 5% / 366= 6.83 (rounded to number of decimals specified in Depreciation Model). 6.83 x 366 = 2,499.78
- Values per Month
- Depreciation for one month = 50,000.00 x 5% / 12 = 208.33 (rounded to number of decimals specified in Depreciation Model). 208.33 x 12 = 2,499.96
- Values per Quarter
- Depreciation for one quarter = 50,000.00 x 1.25% = 625.00 (rounded to number of decimals specified in Depreciation Model). 625.00 x 4 = 2,500.00 (note: for 5% annual depreciation, enter the quarterly depreciation percentage 1.25 in the Depreciation Model)
- Values per Year
- Depreciation for one year = 50,000.00 x 5% = 2,500.00 (rounded to number of decimals specified in Depreciation Model)
- Depreciation for 2025
- Period: 1/1/2025 - 31/12/2025
- Values per Day
- Depreciation for one day = 50,000.00 x 5% / 365 = 6.85. 6.85 x 365 = 2,500.25
- Values per Month
- Depreciation for one month = 50,000.00 x 5% / 12 = 208.33. 208.33 x 12 = 2,499.96
- Values per Quarter
- Depreciation for one quarter = 50,000.00 x 1.25% = 625.00. 625.00 x 4 = 2,500.00
- Values per Year
- Depreciation for one year = 50,000.00 x 5% = 2,500.00
- Depreciation for January 2024
- Period: 1/1/2024 - 31/1/2024
- Values per Day
- Depreciation for one day = 50,000.00 x 5% / 366 = 6.83. 6.83 x 31 = 211.73
- Values per Month
- Depreciation for one month = 50,000.00 x 5% / 12 = 208.33
- Values per Quarter
- Depreciation for one quarter = 50,000.00 x 1.25% = 625.00. 625.00 / 3 = 208.33
- Values per Year
- Depreciation for one year = 50,000.00 x 5% = 2,500.00. 2,500.00 / 12 = 208.33
- Depreciation for December 2024
- Period: 1/12/2024 - 31/12/2024
- Values per Day
- Depreciation for one day = 50,000.00 x 5% / 366 = 6.83. 6.83 x 31 = 211.73
- Values per Month
- Depreciation for one month = 50,000.00 x 5% / 12 = 208.33
- Values per Quarter
- Depreciation for one quarter = 50,000.00 x 1.25% = 625.00. 625.00 / 3 = 208.33
- Values per Year
- Depreciation for one year = 50,000.00 x 5% = 2,500.00. 2,500.00 / 12 = 208.33
- Depreciation for January 2025
- Period: 1/1/2025 - 31/1/2025
- Values per Day
- Depreciation for one day = 50,000.00 x 5% / 365 = 6.85. 6.85 x 31 = 212.35
- Values per Month
- Depreciation for one month = 50,000.00 x 5% / 12 = 208.33
- Values per Quarter
- Depreciation for one quarter = 50,000.00 x 1.25% = 625.00. 625.00 / 3 = 208.33
- Values per Year
- Depreciation for one year = 50,000.00 x 5% = 2,500.00. 2,500.00 / 12 = 208.33
Declining Balance ModelThis Model depreciates an Asset by a reducing amount each year, using its initial value (i.e. the purchase price) less the previous depreciation as the basis for the calculation. This initial value declines on a monthly basis (if an Asset has a quarterly Declining Balance Model the initial value will decline on a quarterly basis).
When using a Declining Balance Model, it is not possible to calculate depreciation for periods shorter than one month. If you select the Values per Day option when calculating depreciation, this will be ignored and depreciation will be calculated as if you had selected the Values per Month option. If you specify a period that is not a number of whole months, depreciation will be calculated from the first day of the month that you specify as the start of the period to the last day of the month that you specify as the end of the period.
If you have specified in a Depreciation Model that depreciation is to be calculated quarterly, you must select the According to Model option when running the Maintenance function or when producing reports and you must specify a period that is a number of whole quarters. Monthly depreciation will not be calculated for Assets with quarterly Declining Balance Models.
If you have specified in a Depreciation Model that depreciation is to be calculated yearly and you have selected the According to Model option when running the Maintenance function or when producing reports, depreciation will be calculated as if you had selected the Values per Month option.
- Depreciation for 2024
- Period: 1/1/2024 - 31/12/2024. The starting value declines each month or quarter.
- Values per Month
- (50,000.00 x 5% / 12) + ((50,000.00 - 208.33) x 5% / 12) + ... + ((50,000.00 - 2,244.52) x 5% / 12) = 2,443.50. The calculation for each month will be rounded to number of decimals specified in the Depreciation Model
- Values per Quarter
- (50,000.00 x 1.25%) + ((50,000.00 - 625.00) x 1.25%) + ? + ((50,000.00 - 609.47) x 1.25%) = 2,453.51 (note: for 5% annual depreciation, enter the quarterly depreciation percentage 1.25 in the Depreciation Model) . The calculation for each quarter will be rounded to number of decimals specified in the Depreciation Model
- Depreciation for 2025
- Period: 1/1/2025 - 31/12/2025
- Values per Month
- (47,556.50 x 5% / 12) + ((47,556.50 - 198.15) x 5% / 12) + ... + ((47,556.50 - 2,134.83) x 5% / 12) = 2,324.08
- 47,556.50 is the starting value at the start of January 2025, taking the depreciation for the previous year into account, and declines further each month.
- Values per Quarter
- (47546.49 x 1.25%) + ((50,000.00 - 594.33) x 1.25%) + ? + ((50,000.00 - 579.57) x 1.25%) = 2,333.12
- 47546.49 is the starting value at the start of January 2025, taking the depreciation for the previous year into account, and declines further each quarter.
- Depreciation for January 2024
- Period: 1/1/2024 - 31/1/2024
- Values per Month
- 50,000.00 x 5% / 12 = 208.33
- Values per Quarter
- Not a valid period
- Depreciation for February 2024
- Period: 1/2/2024 - 29/2/2024
- Values per Month
- 49,791.67 x 5% / 12 = 207.47
- 49,791.67 is the starting value at the start of February 2024, taking the depreciation for the previous month into account.
- Values per Quarter
- Not a valid period
- Depreciation for December 2024
- Period: 1/12/2024 - 31/12/2024
- Values per Month
- 47,755.48 x 5% / 12 = 198.98
- 47,755.48 is the starting value at the start of December 2024, taking the depreciation for the previous 11 months into account.
- Values per Quarter
- Not a valid period
- Depreciation for January 2025
- Period: 1/1/2025 - 31/1/2025
- Values per Month
- 47,556.50 x 5% / 12 = 198.15
- 47,556.50 is the starting value at the start of January 2025, taking the depreciation for the previous 12 months into account.
- Values per Quarter
- Not a valid period
- Depreciation for Quarter 1 2024
- Period: 1/1/2024 - 31/3/2024
- Values per Month
- (50,000.00 x 5% / 12) + ((50,000.00 - 208.33) x 5% / 12) + ((50,000.00 - 415.80) x 5% / 12) = 622.40
- Values per Quarter
- 50,000.00 x 1.25% = 625.00
- Depreciation for Quarter 2 2024
- Period: 1/4/2024 - 30/6/2024
- Values per Month
- (49,377.60 x 5% / 12) + ((49,377.60 - 205.74) x 5% / 12) + ((49,377.60 - 410.62) x 5% / 12) = 614.65
- Values per Quarter
- 49,375.00 x 1.25% = 617.19
Start from Last Revalued ValueIn this example, the Asset from the previous examples is used again, and there is one Revaluation record with a Starting Date of 1/7/2025 and a Starting Value of 55,000.
If you do not use the Start from Last Revalued Value option, each Revaluation record will take effect from its Starting Date. If you are using a Straight Line Depreciation Model and you are calculating depreciation on a Per Day basis, each Revaluation record will take effect from the exact Starting Date. If you are calculating depreciation on a Per Month basis, each Revaluation record will take effect from the first day of the month of the Starting Date. If you are using a Declining Balance Model, depreciation is always calculated on a Per Month basis.
- Depreciation for 2024
- Period: 1/1/2024 - 31/12/2024
| Straight Line | (50,000.00 x 5% / 12) x 12 = 2,499.96 | | Decl. Balance | (decl. mthly from 50,000.00) 2,443.50 | |
- Depreciation for 2025
- Period: 1/1/2025 - 31/12/2005
- Straight Line
| 1/1/25 - 30/6/25 | (50,000.00 x 5% /12) x 6 = 1,249.98 | | + | 1/7/25 - 31/12/25 | (55,000.00 x 5% /12) x 6 = 1,375.02 | | = | | 2,625.00 |
- Decl. Balance
| 1/1/25 - 30/6/25 | (decl. mthly from 47,556.50) 1,176.60 | | + | 1/7/25 - 31/12/25 | (decl. mthly from 51,379.91) 1,271.19 | | = | | 2,447.79 |
(51,379.91 is 55,000.00 less depreciation to 1/7/25)
If you use the Start from Last Revalued Value option, the value in the latest Revaluation record (even if its Starting Date is later than the end of the report period) will be used as the original Purchase Value of the Asset. Any intervening Revaluations will be ignored. The depreciation from previous years will therefore be recalculated retrospectively.
- Depreciation for 2024
- Period: 1/1/2024 - 31/12/2024
| Straight Line | (55,000.00 x 5% / 12) x 12 = 2,750.04 | | Decl. Balance | (decl. mthly from 55,000.00) 2,687.85 | |
- Depreciation for 2025
- Period: 1/1/2025 - 31/12/2025
| Straight Line | (55,000.00 x 5% / 12) x 12 = 2,750.04 | | Decl. Balance | (decl. mthly from 52,312.15) 2,556.49 | |
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