Depreciation is a systematic transfer of value of fixed assets as they wear. So why use depreciation? For this reason there are several opinions. Some experts believe that with the help of the amortization process, you can create cash flows that will be subsequently directed to the recovery of fixed assets. Other financiers consider depreciation as the method of gradual distribution of major expenditure across periods for the accrual. Any employee each month gradually reduces the cost of fixed assets: devices, machines, equipment. And this happens until the time when the value of the object or article reaches the value zero. And if the deduction of the subject to spend one month in the reporting period can be a huge loss for the company. While the product works, the company is in profit, but once it is broken, out of order, worn out, the company incurs some losses. In addition, if we consider the depreciation from the point of view of shareholders, they a little better to fool yourself during, for example, of the year than in one month to see the stunning truth about the loss. And there are times when looking at the report, which contains the entire amount worn subject matter, they will not be able to understand why the company worked all the time stable, and in this reporting period she received a huge loss. Some financial workers using depreciation can help the enterprise to pay less income tax. This is due to the fact that it is not always the amount of depreciation coincides with the actual physical wear and tear. If this amount will be more, income tax will be much less. Do not forget that the attenuation performance requires accounting standard. And with the help of such procedure you can get a lot of good for enterprise.
Why the need for depreciation
In connection with the physical and moral wear and tear gradually reduced the cost of fixed resources. In this regard, the accounting Department introduced the systematic allocation of the amortised amount of all major fixed assets during the period of operation. The object of depreciation becomes the value of fixed assets.
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