Here is my scenario:
The company has about 400 items on the fixed asset register of various lives. No really significant assets like brake presses etc, just the usual collection of computers, furniture, filing cabinets, general hardware.
Currently, we calculate depreciation on a monthly basis, (25% straight line), with some assets reaching the end of their lives each month.
I would like to propose that we calcuate the annual charge, and then divide this charge over 12 even months. This would keep the charge level in the management accounts. The annual charge would be identical.
Anyone else do this?
Thanks
Replies (4)
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Excel
Is it difficult to do it properly? Can't you have the register on Excel and calculate 25% (per year I assume) / 12 for each month that you have an asset and then use the total depreciation in the annual accounts?
Up to you
I have seen both methods in use plus more besides. Use whichever suits you best. Just be aware of the difference that this can have during the course of the year.
As monthly depreciation is for management reporting purposes only you can do what you like. Ignore it completely if that makes more sense to the user of the accounts (and many business owners don't seem to 'get' non cash accounting adjustments like depreciation).
As long as the statutory accounts are correct what goes in management accounts should be, imo, prepared in whatever way makes them most useful fo the owner/directors as a management tool in running the business.