Tax Tip Week 33 - Calculating Depreciation
When you purchase an asset; if the net value is £500 or above then it will need writing onto the Balance Sheet as an asset. Purchases of computer equipment under this value can be classed as an expense in the Profit and Loss Account.
When an asset is written into the accounts it's 'useful' life has to be determined and the depreciation calculated accordingly.
There are two ways to calculate depreciation:
1) Straight line method
2) Reducing balance method
For full details please see our guidance on Depreciation methods