What is positive wear
Depreciation - depreciation of assets
As an entrepreneur, you invest in assets that are essential to your business. These can be technical devices for production, a vehicle fleet, computers or even real estate. These goods have a value that diminishes over the time they are used. Wear and tear, use, weathering, technical progress or the expiry of rights can be reasons for a decrease in value. The depreciation of these assets must be recorded in a company's accounting as so-called depreciation. Depreciation is charged as an expense in the year it is recorded and reduces a company's bottom line. In tax law and accounting, depreciation is also referred to as depreciation for wear and tear, or depreciation for short.
That is why there is the AfA
Depreciation is required by law. It is used by companies to record losses in the value of fixed and current assets. With the depreciation, companies can save an amount that is needed for the acquisition of new assets and thus create a cushion for themselves. The depreciation reduces the profit of a company. The entrepreneur has the opportunity to influence his profits positively or negatively through targeted depreciation.
The basis of depreciation
The legal basis for the AfA is Section 253, Paragraphs two to four, in the Commercial Code, or HGB for short. In general, fixed and current assets are subject to depreciation. This includes land, buildings, machines, vehicles, operating and office equipment, tools, concessions, patents, licenses and claims. The accounting department is allowed to write off the entire acquisition costs over a specified period of time. The costs are not limited to the purchase price, but also include all other financial burdens associated with the purchase, as well as discounts and, if necessary, a cash discount. Anyone who wants to calculate the acquisition costs of a good must therefore add up the net price of the product and the costs for special equipment and accessories. The ancillary acquisition costs, such as the costs for installation or delivery, are also added. In the end, price reductions are deducted in the form of discounts. The acquisition costs calculated in this way may be written off.
This is how you determine the acquisition costs:
Net price + price increase due to additional equipment + ancillary acquisition costs - price reduction = acquisition costs
Depreciation: a lengthy process
In accounting, only amounts under 150 euros may be written off in full in the year of purchase. All other amounts are written off over several years in equal or different parts. For amounts under 450 euros, it is common to collect these over a year and then write off all amounts together over five years. All purchased items that cost more are written off individually over their expected useful life. This means that an entrepreneur has to estimate in advance how long a device will be used. This duration is specified in a depreciation table. Usually a car is sold for six years, a notebook or PC for three years and a piece of furniture for the office for 13 years. If the useful life cannot be estimated, it is usually depreciated over ten years.
Danger: The duration of the depreciation says nothing about the actual duration of use. An asset can also be used beyond the period of depreciation.
This is how you sell assets correctly
Different types of depreciation are defined in accounting. They are roughly divided into scheduled and unscheduled depreciation.
In this case, depreciation is carried out according to the depreciation table. This type is also divided into straight-line, progressive and performance-related depreciation.
With this depreciation method, the asset is depreciated evenly over its useful life. The amount written off annually is always the same. It is the legal rule.
Annual depreciation = acquisition cost / useful life
In this case, the depreciated amounts increase continuously with increasing useful life. This form is mainly used for fixed assets, the value of which increases annually, such as wineries. The counterpart to progressive depreciation is declining balance depreciation, which can only be used for assets that were acquired before December 31, 2010.
This type of depreciation is made when the value of an object falls over the long term within its planned useful life. Most often it is done when the valuable asset is damaged. This means that an item can be written down over a larger value in one year.
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