Create Depreciation Simulations - Examples
These examples use an Asset with a Purchase Value of 50,000, a depreciation of 5% p.a. and a starting date of 1/1/2004.
Straight Line ModelThis Model depreciates 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 if you use the Values per Day option. Otherwise, the period must be a number of whole months or years.
- Depreciation for 2004
- 1/1/2004 - 31/12/2004 is entered as the period.
- Values per Month
- 50,000.00 x 0.05 = 2,500.00
- Values per Day
- 50,000.00 x 0.05 / 366 x 366 (2004 is leap year) = 2,500.00
- Depreciation for 2005
- 1/1/2005 - 31/12/2005 is entered as the period.
- Values per Month
- 50,000.00 x 0.05 = 2,500.00
- Values per Day
- 50,000.00x 0.05 / 365 x 365 = 2,500.00
- Depreciation for January 2004
- 1/1/2004 - 31/1/2004 is entered as the period.
- Values per Month
- 50,000.00 x 0.05 / 12 = 208.33
- Values per Day
- 50,000.00 x 0.05 / 366 x 31 = 211.75
- Depreciation for December 2004
- 1/12/2004 - 31/12/2004 is entered as the period.
- Values per Month
- 50,000.00 x 0.05 / 12 = 208.33
- Values per Day
- 50,000.00 x 0.05 / 366 x 31 = 211.75
- Depreciation for January 2005
- 1/1/2005 - 31/1/2005 is entered as the period.
- Values per Month
- 50,000.00 x 0.05 / 12 = 208.33
- Values per Day
- 50,000.00 x 0.05 / 365 x 31 = 212.33
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.
The Values per Month/Values per Day options do not apply to the Declining Balance Model. Depreciation cannot be calculated for periods of less than one month: the period must be a number of whole months or years.
- Depreciation for 2004
- (50,000.00 x 0.05 / 12) + ((50,000.00 - 208.33) x 0.05 / 12) + ... + ((50,000.00 - 2,244.52) x 0.05 / 12) = 2,443.50
- 1/1/2004 - 31/12/2004 is entered as the period. The starting value declines each month.
- Depreciation for 2005
- (47,556.50 x 0.05 / 12) + ((47,556.50 - 198.15) x 0.05 / 12) + ... + ((47,556.50 - 2,134.83) x 0.05 / 12) = 2,324.08
- 1/1/2005 - 31/12/2005 is entered as the period.
- 47,556.50 is the starting value at the start of January 2005, taking the depreciation for the previous year into account, and declines further each month.
- Depreciation for January 2004
- 50,000.00 x 0.05 / 12 = 208.33
- 1/1/2004 - 31/1/2004 is entered as the period.
- Depreciation for December 2004
- 47,755.48 x 0.05 / 12 = 198.98
- 1/12/2004 - 31/12/2004 is entered as the period.
- 47,755.48 is the starting value at the start of December 2004, taking the depreciation for the previous 11 months into account.
- Depreciation for January 2005
- 47,556.50 x 0.05 / 12 = 198.15
- 1/1/2005 - 31/1/2005 is entered as the period.
- 47,556.50 is the starting value at the start of January 2005, taking the depreciation for the previous 12 months into account.
Declining Balance 2 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. Unlike the Declining Balance Model described above, the basis for the calculation does not decline every month but only every January. The depreciation for each month in a calendar year is therefore the same.
The Values per Month/Values per Day options do not apply to the Declining Balance Model. Depreciation cannot be calculated for periods of less than one month: the period must be a number of whole months or years.
- Depreciation for 2004
- 50,000.00 x 0.05 = 2,500.00
- 1/1/2004 - 31/12/2004 is entered as the period.
- Depreciation for 2005
- 47,500.00 x 0.05 = 2,375.00
- 1/1/2005 - 31/12/2005 is entered as the period.
- 47,500.00 is the starting value at the start of January 2005, taking the depreciation for the previous year into account.
- Depreciation for January 2004
- 50,000.00 x 0.05 / 12 = 208.33
- 1/1/2004 - 31/1/2004 is entered as the period.
- Depreciation for December 2004
- 50,000.00 x 0.05 / 12 = 208.33
- 1/12/2004 - 31/12/2004 is entered as the period.
- 50,000.00 is the starting value at the start of December 2004. The starting value is not reduced until the beginning of the next calendar year.
- Depreciation for January 2005
- 47,500.00 x 0.05 / 12 = 197.92
- 1/1/2005 - 31/1/2005 is entered as the period.
- 47,500.00 is the starting value at the start of January 2005, taking the depreciation for the previous 12 months into account.
Each time you run the 'Create Depreciation Simulations' Maintenance function, it effectively calculates the depreciation again for the previous periods before doing so for the current period.
Start from Last Revaluated ValueIn this example, the Asset from the previous examples is used again, and there is one Revaluation record with a Starting Date of 1/7/2005 and a Starting Value of 55,000.
If you do not use the Start from Last Revaluated 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 2004
- 1/1/2004 - 31/12/2004 is entered as the period.
| Straight Line | 50,000.00 x 0.05 = 2,500.00 | | Decl. Balance | (decl. mthly from 50,000.00) 2,443.50 | | Decl. Balance 2 | 50,000.00 x 0.05 = 2,500.00 |
- Depreciation for 2005
- 1/1/2005 - 31/12/2005 is entered as the period.
- Straight Line
| 1/1/05 - 30/6/05 | 50,000.00 x 0.05 x 6/12 = 1,250.00 | | + | 1/7/05 - 31/12/05 | 55,000.00 x 0.05 x 6/12 = 1,375.00 | | = | | 2,625.00 |
- Decl. Balance
| 1/1/05 - 30/6/05 | (decl. mthly from 47,556.50) 1,176.60 | | + | 1/7/05 - 31/12/05 | (decl. mthly from 51,379.51) 1,271.19 | | = | | 2,447.79 |
(51,379.91 is 55,000.00 less depreciation to 1/7/05)
- Decl. Balance 2
| 1/1/05 - 30/6/05 | 47,500.00 x 0.05 x 6/12 = 1,187.50 | | + | 1/7/05 - 31/12/05 | 51,312.50 x 0.05 x 6/12 = 1,282.81 | | = | | 2,470.31 |
(51,312.50 is 55,000.00 less depreciation to 1/7/05)
If you use the Start from Last Revaluated 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 2004
- 1/1/2004 - 31/12/2004 is entered as the period.
| Straight Line | 55,000.00 x 0.05 = 2,750.00 | | Decl. Balance | (decl. mthly from 55,000.00) 2,687.85 | | Decl. Balance 2 | 55,000.00 x 0.05 = 2,750.00 |
- Depreciation for 2005
- 1/1/2005 - 31/12/2005 is entered as the period.
| Straight Line | 55,000.00 x 0.05 = 2,750.00 | | Decl. Balance | (decl. mthly from 52,312.15) 2,556.49 | | Decl. Balance 2 | 52,250.00 x 0.05 = 2,612.50 |
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