Depreciation reflects the pattern of the benefit flowing from the tangible asset(s) – property plant & equipment (PPE) – to the entity holding it.
There are many types/categories of PPE like building, machinery, plant, equipment, fixtures, leasehold assets, vehicles.
The deprecation begins when the asset is available for use as intended by management until the date is disposed or classified for sale.
Further, each asset class is likely to have a different useful life/depreciation rate, depreciation, capital expense, overhauling, method and alterations (addition/deletions), and many other related issues.
To deal with all these complexities, accountants often use a standard schedule to report all these mentioned things related to PPE in an orderly manner.
A specimen of a typical depreciation schedule is as given below: (usually given with figures of last comparative accounting period)
The following is the main information included in the depreciated schedule. You have to fill in these data to prepare the depreciation schedule.
1.) Opening Cost: this is the opening value of asset brought forwarded (b/f) from the last accounting period (closing value of last period).
2.) Additions/disposals/adjustment: During the accounting period, if any capital expenditure is made regarding the asset, it would be added to the asset’s cost. Capital expenditure means any overhauling/replacement made that leads to additional benefits from an asset or increases its useful life, or improves efficiency. You must keep in mind that all other routine expenses like ordinary repairs be charged to the income statement during the accounting period.
3.) Closing Cost: this is simply a summation of ‘Opening cost’ and ‘additions/disposals/adjustments.’
4.) Opening Accumulated depreciation: this is the opening value of accumulated depreciation brought forward (b/f) from the last accounting period (closing value of last period).
It is the summation of all deprecation from the day when assets first time put to use till the year-end of the last accounting period.
5.) Depreciation Expense for the period: depending upon the deprecation method of the particular asset (its straight line or reducing balance method as the case may be), it is the deprecation amount for the year.
6.) Adjustment: In case of any change in estimate of assumption related to the asset being depreciated, like change in useful life, method of deprecation, etc. An appropriate (pro-rata) adjustment be made in cost estimate as well as accumulated depreciation figure.
7). Closing Accumulated depreciation: this is a simple summation of ‘Opening accumulated depreciation,’ ‘adjustment,’ and ‘deprecation for the period.’
8.) Carrying Value: It is calculated by taking the difference of ‘closing cost,’ closing accumulated depreciation. It is also referred to as net book value (NBV).
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Now, let’s move to a simple, practical example of a depreciation schedule. On July 01, 2018, ABC plc had a plant with an opening book value of $ 4,000 and accumulated depreciation of $ 2,000, capital expenditure during the period is $ 500, repairs $ 100. The rate of depreciation is 10% per annum.
| Depreciation Schedule 2018-19 | USD |
| Cost as at July 01, 2018 | 4000 |
| Addition during the period | +500 |
| Cost as at June 30, 2019(A) | 4,500 |
| Accumulated depreciation as at July 01, 2018 | 2,000 |
| Deprecation during the period (4,000@10%) | +400 |
| Accumulated depreciation as at June 30, 2019(B) | 2,400 |
| Carrying Value as at June 30, 2019 (A-B) (4,500 – 2,400) | 2,100 |