Depreciation in the real world

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Help!<BR><BR>I am working as the finance person in a new company. Although we are yet to start trading, there are still loads of things going on! <BR><BR>I have set up all the bits n pieces on Sage required for day-to-day running but need some help with depreciation...<BR><BR>We have recently (Sept) bought a second hand photocopier and a few other fixed assets. My boss has asked for a b/sheet for end Nov and so far there has been no depreciation accounted for. Is there somewhere that states the depreciation in years, or the rate, or the method? Apaarently there is in other countries, but so far i have nothing for the UK<BR><BR>Any advice would be greatly welcomed!<BR><BR>xxHelenxx

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Depreciation in the real world

    As far as I'm aware it is up to the company to set the policy and they must use the same policy each year. It would be useful to estimate the amount of years you will use equipment and then depreciate it over that time but it's up to you whether you use reducing balance or straight line, and by what percentage you depreciate it by.<BR><BR>Good luck<BR>Annette
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Depreciation in the real world

    Yes the company must set its policy and stick to it, it can change it from reducing balance to straight line if necessary but must give a reason for doing so. As it's the first year for your company this shouldn't apply for the time being anyway.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Depreciation in the real world

    Being in the real world you should also consider the tax reliefs available on the assets you purchase. When you have to compute taxable profits chargeable to corporation tax you need to know what capital allowances you qualify for as a new small business. This is a deduction to profit and similar to depreciation. In some cases you can claim 100% of the assets value as a deduction to profit. Hopefully you will be made aware of this by your local IR officer.<BR><BR>David
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Depreciation in the real world

    Give your company's accountant a quick ring, they will be delighted to advise. If you haven't got a firm of accountants yet, please e-mail me at bryan.cooper@hychester.co.uk and I'll give you a quote!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Depreciation in the real world

    Thank you guys!!<BR><BR>Bryan - apparently our accountants are extortionate and cost a fortune even to advise!<BR>David - I haven't been contacted by my IR officer - i didn't know they were that friendly! I shall have to give them a call.<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Depreciation in the real world

    Hi Helen,<BR><BR>They are right your company does need to work out what type of deprciation method they want to use, where as there are two way that you can enter it into sage.<BR>1) You can set up all the depreciation that sage has and all you have to do after each period is click on the button (Which i find can be a problem if you forget to click on it).<BR>2) You can do a jounal entery which is pretty simple and you can store all you information on excel which also means you can set the cells to work out the depreciation for you.<BR>I recommend the second option because its a good reminder and you know that you have done it. <BR>Also you depreciation is always up-to-date and you can see everything that you have put depreciation on.<BR><BR>If you wish to know more just ask.<BR><BR>Stephen

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