Balance Sheet Depreciation

Balance Sheet DepreciationBalance sheet depreciation is also known as accumulated depreciation and reduces the total value of the fixed assets.

A Fixed asset has a value to a business and the value is written off over a fixed period of time. There are 2 main methods of writing off an asset – straight line method and reducing balance.

The length of time an asset is written off can depend on the type of asset, normally it is either 3 or 5 years but for some assets it can be more. If you are unsure of the best methods of calculating your fixed assets speak to your accountant and they will be able to advise you.

To help calculate your figures use our depreciation calculator, enter a few simple details and it will calculate your depreciation.

We also have a template to calculate all you depreciation over a 10 year period. It is simple to use, enter the details of the asset, purchase value and number of years to depreciate it by and it will calculate the figure year by year.

Depreciation Schedule

 

Accounting for Balance Sheet Depreciation

As with all accounting a double entry posting needs to be completed. The entries are as follows:

Depreciation is posted as an expense each month to the profit and loss account and also is posted to the Balance sheet to reduce the value of the fixed assets, also known as accumulative depreciation.


Balance Sheet Depreciation Example

Balance sheet showing depreciation

Business ABC owns a computer, when purchased it cost £540 pounds. The business uses straight line depreciation method over a period of 3 years. The computer has been owned for 12 months.

Monthly depreciation is posted to expense on the Profit & Loss at £15 per month.

The balance sheet accumulative depreciation is the figure for the whole 12 months and is therefore £180.

Fixed Assets540
Accumulated depreciation180
Value of fixed assets360

Return from balance sheet depreciation to balance sheet page.