There can be confusion when dealing with different calendars and how to correctly allocate depreciation for each period. Here is a sample depreciation calculation that illustrates the necessary formulas:
In this spreadsheet we set up a sample calendar using the year 2014. Bassets eDepreciation allows the user the flexibility to set up alternative calendars, such as 4-4-5 or 13 period. In the example above we demonstrate a 4-5-4 calendar. As you can see, it follows a retail format of 28 days (4 weeks), 35 days (5 weeks), 28 days (4 weeks) in each quarter. Row 7 calculates the number of days in each accounting periods, while row 8 displays the cumulative number of days in the year.
The yellow cells in row 14 represent the calculation variables for cost, life and calculation period. The formulas just below will use these variables to calculate the correct depreciation for the selected period. The key to these calculations is to first establish the annual depreciation in order to compute a daily rate based on the number of days in the year.
The above example is very simple using a straight line method with full month first year convention and the asset placed in service during the first period. Obviously the calculation gets a little trickier with a half year convention or if the service date is later in the year. A change in convention will impact the annual amount while a later service date will reduce the number of days in the first year.
Additionally, other factors like adjustments, transfers and disposals can significantly impact the calculations. A full featured fixed asset software program like Bassets eDepreciation will automatically generate the correct numbers for any single period or range of periods using your company’s calendar. For more information on the 445 or 13 period accounting, look at this earlier post:
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More information about Bassets eDepreciation software can be found at Bassets.net. While there you can set up a demonstration, download a free evaluation copy and get a personalized pricing estimate.