Fixed assets make up a considerable chunk of a company's investments, and maximizing return on investment (ROI) is essential for every business. Fixed assets include buildings, computer equipment, software, furniture, machinery, office equipment, and vehicles. Meanwhile, intangible assets include patents, licenses, copyrights, land, and leasehold goods.
To increase corporate efficiency and lower procurement costs, effective asset management software in India is crucial. This is where Fixed Asset Management Software into play. With the right software, companies can easily track and manage their fixed assets, ensuring that they are being used to their full potential.
Apart from increasing efficiency, fixed assets also play a significant role in accounting, helping firms claim tax benefits by recording them in their account books. By using fixed asset management software, companies can easily calculate depreciation and other tax-related benefits, ensuring that they stay compliant with accounting regulations.
What is Asset Depreciation and how it works?
Asset depreciation is the gradual decrease in the value of a fixed asset owing to wear and tear, obsolescence, or other reasons. There are several ways for calculating depreciation, including the straight-line approach, the decreasing balance method, and the sum-of-the-years'digits method.
The straight-line approach is the most basic and often used method. It calculates depreciation by dividing the asset's cost by its duration of use. For instance, if you spend $10,000 on a machine with a five-year lifespan, the yearly depreciation expenses via the straight-line technique is $2,000 ($10,000 divided by 5 years).
The declining balance method calculates depreciation based on a fixed percentage of the asset's book value each year. This method typically results in higher depreciation in the early years of the asset's life and lower depreciation in later years.
The sum-of-the-years'digits approach computes depreciation based on the total number of years the asset is functional. desk monitoring software in india for instance, if you buy a machine with a five-year lifespan, the total of the years' digits is 15 (1+2+3+4+5). Depreciation would be determined as 5/15 of the asset's cost in the first year, 4/15 in the second year, and so on.
By using one of these methods to calculate asset depreciation, businesses can track the decrease in value of their fixed assets over time. This helps them determine when to replace or upgrade assets and can help reduce tax liabilities by accurately calculating depreciation expenses. Investing in a reliable fixed asset management software can make calculating asset depreciation easier and more accurate.
Overall, managing asset depreciation is crucial for businesses to optimize their investments and increase profits. By tracking asset depreciation, businesses can determine when to replace old assets or purchase new ones, as well as reduce their tax liabilities. Therefore, it is essential for businesses to invest in reliable asset management solutions that offer effective depreciation tracking capabilities.
