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Depreciation

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G0020 Depreciation  Definition of Depreciation  Purpose of Depreciation  Straight Line Method  Sum of the Year Digits Method  Sinking Fund  Declining Balance  Determine Depreciation Cost Depreciation * Property of STI Page 1 of 20 G0020 Depreciation  the decrease in value of physical properties with the passage of time  an annual deduction against a before-tax income Purpose of Depreciation  To match yearly fraction of value used by an asset in the production of income over the asset’s actual economic life Depreciation * Property of STI Page 2 of 20 G0020 Depreciable Property  property that is eligible for depreciation deductions  property for which depreciation is allowed under national, state or municipal income tax laws and regulations Property is depreciable if: 1. It is used in business or held to produce income. 2. It has a determinable useful life of more than one year. 3. It is something that wears out, decays, gets used up, becomes obsolete, or loses value from natural causes. 4. It is not inventory, stock in trade, or investment property. Depreciation * Property of STI Page 3 of 20 G0020 Depreciable Property  Tangible (can be seen or touched)  Personal property  Real property  Intangible (such as copyrights, patents, or franchises)  Starts to depreciate when put in service (when it is ready and available for its specific use) Depreciation * Property of STI Page 4 of 20 G0020 ...
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