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Accounting Topics > Depreciation

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Depreciation
Depreciation
Depreciation
Depreciation
Depreciation

What is Depreciation? A Basic Definition

The reduction in value of an asset over time; the accounting entries made to reflect that loss of value.

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  • bankrate: estimating capital gains tax

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  • Capital Allowance & Depreciation: Capital allowances are given as a tax deduction in place of the accounting concept of depreciation. A business will receive capital allowances each year. Assuming you are a small business you are able to get a First year allowance as a capital allowance. If the equipment has been purchased prior to 6 April 2006 then the first year is 40%, if after this date, the allowance is 50%. Whatever the balance is for the following year, the allowance then becomes 25% on a reducing balance basis i.e. Asset bought for £100 on 1 May 2006 First year allowance: 50% x 100 = £50 Second year capital allowance: 25% x 50 = £12.50 Balance to carry forward to the third year (50-12.50) = £37.50 Third year capital allowance 25% x 37.50 = £9.37 etc

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