- Writing a Business Plan
- Financial Statements
- Business Forecasting
- Business Checklist
Part 4 - Determine the Accumulated Depreciation of each Fixed Asset Category
Accumulated Depreciation is an account that "tallies" a fixed asset's depreciation expense during its useful life. In other words, it accumulates a fixed asset's reduction in value during its useful life. In our example, Murray estimated the Automobile would depreciate $1,000 in 200X (six month period) and $2,000 in 200Y (12 month period). As a result, the accumulated deprecation for the automobile on December 31, 200X, would be $1,000, while the accumulated deprecation on December 31, 200Y would be $3,000 ($1,000 in 200X plus $2,000 in 200Y = $3,000). On December 31, 200Z, the Automobile's accumulated deprecation would be $5,000 ($1,000 in 200X plus $2,000 in 200Y plus $2,000 in 200Z = $5,000).
Recall from the previous discussions, Murray estimated the Office Equipment would depreciate $1,400 in 200X and $3,200 in 200Y. As a result, the accumulated deprecation for the computer & Accessories as of December 31, 200X would be $1,400, while the accumulated deprecation as of December 31, 200Y would be $4,600 ($1,400 in 200X plus $3,200 in 200Y = $4,600). Assuming no additional purchases were made into this fixed asset category, the Office Equipment's December 31, 200Z accumulated deprecation would be $7,800 ($1,400 in 200X plus $3,200 in 200Y plus $3,200 in 200Z = $7,800).
The above accumulated deprecations will appear under the Fixed Asset Section of Murray's 200X and 200Y Forecasted Balance Sheet.