Sample Depreciation Calculation with 4-5-4 Calendar

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:

Sample Depreciation Calculation 2

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:

4-4-5 Calendar to Calculate Period Depreciation

Questions? Comments? Let us know in the comments section below.

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.

 

 

4-4-5 Calendar to Calculate Period Depreciation

A 4-4-5 calendar is used by some industries like retail and manufacturing to manage their accounting periods. This presents some advantages over a standard calendar since each period will always end on the same day of the week. So this allows for easier comparison of current year sales to prior years in retail and scheduling in manufacturing.

A 4-4-5 calendar only has 364 days (7 days * 52 weeks), so most companies will make an adjustment every 5 years or so with a 53 week year to account for the missing day. Here is a sample calendar for 2013:4-4-5 Calendar

The heart of a 4-4-5 module is a calendar that allows you to enter the first and last day of each accounting period. For example, if the first day of the year was December 30, 2012 and the last day of the first accounting period was January 26, 2013 then we would have a 4 week period of 28 days. The second period would follow the same pattern and then the third period would be five weeks. Each quarter would have 13 weeks or 91 days and every month would end on Saturday.

To calculate monthly depreciation with a 4-4-5 calendar, it is critical to calculate based on the number of days in the current period. The formula to calculate depreciation for the first period would be:

28 days

—————- X Annual Depreciation = Period Depreciation

365 days

This way the annual depreciation is properly spread based on the actual number of days in each period. Many fixed asset software packages do not offer this type of alternate calculation and will just divide the annual depreciation by 12 periods. If your business follows a 4-4-5 calendar then make sure that your depreciation software correctly matches your period accounting.

Questions or comments about this post? We invite you to respond in the space below.

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.