What is depreciation of fixed assets and intangible assets?

Sometimes you can hear the question about what amortization is. The very word "amortization" has foreign roots. It is of Latin origin and literally means "repayment." In Russian, this term is used in two meanings: mechanical and financial. Repayment can mean a reduction in the effect and gradualness of any process.

Let us consider in more detail what amortization is. The enterprise or individual entrepreneur buys the objects necessary for the production of their products, which have a long service life. Over time, equipment or buildings wear out, and the company reimburses its losses by investing in the price of manufactured goods and services the amount of their wear.

The question of what amortization is, can concern businessmen who are just starting their way in business. Amortization is an accounting concept. It refers to the annual write-off of the partial value of fixed assets and intangible assets as they become depreciated over the production value of products or services.

An individual entrepreneur or a head of a large enterprise should know what amortization and depreciation are, in order to properly plan their expenses. Depreciation deductions are the amount of depreciation in monetary terms, which corresponds to the depreciation of the OS. This is a tax that is accumulated in the state fund. It is created by monthly depreciation charges in accordance with established norms.

Depreciation is not charged to objects whose service life is less than a year, and their price is less than the established limit. They are classified as circulating assets. The fixed assets of enterprises that are financed from the state budget of the country are not depreciated.

Amortization of fixed assets and intangible assets in accounting is accrued in the following ways:

- linear;

- taking into account the reduced balance;

- write-off of the value of the total amount of years of service life;

- write-off of the cost in proportion to the output.

All property of enterprises is distributed by certain depreciation groups, in which the OS and intangible assets are assembled according to the period of operation.

An enterprise or an individual entrepreneur may apply for taxation purposes one of the methods of depreciation: linear or non-linear. You can use different charging methods for fixed assets.

In some groups, an enterprise or an entrepreneur will be able to use the linear method, the rest is non-linear. Amortization can also be accrued as an accelerated method, or slowed down.

Amounts of deductions are included in the cost of production and, accordingly, are transferred to the price of goods or services. Enterprises accumulate these funds in a special fund. The use of depreciation from the depreciation fund is possible only for the renewal or restoration of fixed assets after the expiry of the service life.