|
Depreciation normally required to calculate the value of an ageing asset for the purpose of replacing it at the end of its useful life. It helps you to get a book value on your financial statement for your business. Several depreciation methods are used to calculate the loss in value of an asset. Of these methods, a Chartered Accountant has the possibility to select the one that will truly represent the loss in value of a depreciated asset by respecting the fact that an asset can fluctuate in depreciated value as inflation constantly goes up and down on its own winding road. Fluctuation because of a fluctuating inflation can be tricky at times as it can be rather difficult to calculate the depreciated value of an asset in the real estate field for example. When a client goes up to a real estate agent and ask him to add his house to the market, the real estate agent will go and ask for a house assessment to be completed by a building expert and evaluator. He will see the items you have in the house since you took possession of it way back. With any addition you have made, he will be able to appraise your property accordingly and compare his assessment to the assessed value of your city appraiser. The Bank of any potential buyer will also come to assess the property you are trying to sell to see if the potential buyer has not gone over the hill with his bid for the house he is interested in. House items like window, roofing, wood, floors, kitchen cabinet and water heater all can be depreciated to allow your house to be assessed accordingly. This is why a bank is going to send is appraiser to see if a potential buyer is not bidding to high for the house. The bank is trying to protect you by doing so and if they see the house value to be too high, they will simple tell you they will not lend you the money you need to purchase your dream home. The depreciated assets you have acquired in a house can all be depreciated and if you are trying to sell, the appraiser and the Chartered Accountant will take this into account and record the depreciated value of your property on a depreciation schedule. This depreciation schedule can be added to your balance sheet for financial purpose to cancel out the cost of purchase of an asset when replacing a depreciated one. We can say that accumulated depreciation reports is shown on a different depreciation schedule on your financial statement. It is going to be an entry item on your balance sheet as you are going to have to calculate the depreciated value of your asset at today’s market value. You can see the importance of such a calculation, especially if you are only going to sell the house you added to the market a few months after it’s been listed. The impact of depreciation report on a financial statement can be quantify to reflect the actual value of an asset in today’s dollars with respect to the ever fluctuating economy.
Related Articles -
Depreciation Reports, Financial Statement, Depreciation Methods,
| 
