There are four depreciation methods: average life method, workload method, double declining balance method, and sum of years' digits method.
1. Average life method
The average life method, also known as the straight-line method, is a method of evenly allocating the depreciation of fixed assets to each period. The amount of depreciation calculated in each period using this method is the same amount. The calculation formula is as follows:
Annual depreciation rate = (1 - estimated net residual value rate)/estimated service life (years) *100%
Monthly depreciation rate = annual depreciation rate/12
Monthly depreciation amount = original price of fixed assets * monthly depreciation rate
It is simple to calculate the depreciation of fixed assets using the average life method, but there are also some limitations. Only when the fixed assets have the same load level in each period and the same depreciation expenses should be allocated in each period, it is reasonable to use the average life method to calculate depreciation.
2. Workload method
The workload method is a method of calculating depreciation based on actual workload. This method can make up for the shortcomings of the average age method which only focuses on the time of use and does not consider the intensity of use. The calculation formula is:
Depreciation amount per unit of work = Original price of fixed assets * (1 - Estimated net salvage value rate) / Estimated total workload
Monthly depreciation amount of a certain fixed asset = The monthly workload of the fixed asset * Depreciation amount per unit workload
3. Double declining balance method
The double declining balance method refers to the method that does not consider the estimated net residual value of the fixed asset. In this case, a method of calculating depreciation of fixed assets based on the balance of the original price of fixed assets minus accumulated depreciation at the beginning of each period and double the straight-line depreciation rate. The calculation formula is as follows:
Annual depreciation rate=2/estimated service life (years)*100%
Monthly depreciation rate=annual depreciation rate/12 months
months Depreciation amount = net value of fixed assets * monthly depreciation rate
This method does not consider the residual value income of fixed assets, so it cannot reduce the book depreciation value of fixed assets below its estimated residual value income, that is For fixed assets that are depreciated using the double-declining-balance method, the balance of the net value of the fixed asset minus the estimated net residual value shall be amortized evenly in the last two years of the expiry of the depreciation life of the fixed asset.
4. Sum of years’ digits method
The sum of years’ digits method is to calculate the annual depreciation amount by subtracting the net residual value from the original value of the fixed assets and using a fraction that decreases year by year. , the numerator of this fraction represents the number of years the fixed asset can still be used, and the denominator represents the sum of the years of use. The calculation formula is:
Annual depreciation rate = remaining useful life/sum of expected useful life years * 100%
Sum of expected useful life years = n*(n+1) /2
Monthly depreciation rate = annual depreciation rate / 12
Monthly depreciation amount = (original price of fixed assets - estimated net residual value) * monthly depreciation rate
Extended information:
Regulations on the minimum depreciation life of fixed assets
1. The minimum depreciation life of houses and buildings is 20 years.
As the most important fixed assets, houses and buildings have a relatively long service life, and the realization of their use value is also a relatively long process. According to the requirements of the income and expenditure matching principle, their depreciation life It should also be relatively long, so this article stipulates that the minimum depreciation life of houses and buildings is 20 years, which can basically reflect the actual use of houses and buildings.
2. The minimum depreciation period for aircraft, trains, ships, machines, machinery and other production equipment is 10 years.
Planes, trains, and ships are means of transportation. Compared with other means of transportation, they have stronger performance, higher value, relatively longer service life, and correspondingly longer depreciation life. Such fixed assets The minimum depreciation period is 10 years.
3. The minimum depreciation period for appliances, tools, furniture, etc. related to production and business activities is 5 years.
Such fixed assets are, in addition to machinery and equipment, related to production and business activities, that is, they are not direct production tools, but appliances, tools, etc. that play an auxiliary role in the production and business process. Their useful lives are relatively short, with a minimum depreciation period of 5 years.
4. For transportation vehicles other than airplanes, trains, and ships, the minimum depreciation period is 4 years.
This type of transportation vehicle has a relatively low value and short service life, so its depreciation life should be correspondingly shorter. Therefore, this article stipulates that the minimum depreciation life of such fixed assets is 4 years.
5. For electronic equipment, the minimum depreciation period is 3 years.
The minimum depreciation period for electronic equipment is 5 years. Taking into account various practical factors such as the rapid technological upgrading and the relatively shortened service life of electronic equipment, this article will increase the minimum depreciation period for electronic equipment from 5 years. Changed to 3 years, so that the company's depreciation deductions can be advanced forward.
Reference: Baidu Encyclopedia-Depreciation of Fixed Assets