Sep 22, 2020
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
Depreciation represents the reduced value of assets.
Each asset in your business has its own useful lifetime.
Based on that useful lifetime, one can expense a portion of the value each year over the life of that asset.
Depreciation goes on the profit and loss statement and also impacts the value of the asset listed on the balance sheet.
Computers for example are often depreciated over a four-year timeframe. If you spent $16,000 on computers and they last four years, then a straight-line depreciation will expense $4,000 per year.
You’ll need to set up a separate worksheet for each asset to calculate and track the depreciation.
You then place the expense on the profit and loss statement and show the reduced value of the asset on the balance sheet.
Based on the type of asset, you may be able to use other depreciation methods aside from straight-line depreciation.
You’ll need to check the IRS
rules for each asset as they have stated requirements for how you
depreciate each type.
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