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Annuity depreciation is where an asset loses value by a measurement other than time. For example, a vehicle's value can be depreciated by how many miles it travels, or a machine based on how many operations it performs. The calculator allows you to enter different criteria based on your requirement.
After entering the initial and final values, select the criteria from the drop-down list, this gives relevant choices for the units in the "per" drop-down box. Note - you do not have to enter values, if they are omitted then the usage will still be calculated.
Depreciation amount = asset value multiplied by the annual percentage
Balance is the asset value minus the depreciation value
For all, be it a business or an individual, depreciation is an important factor to evaluate profitability. When you want to know the actual value that your asset, like a car or any other vehicle, has given to you over time, you have to first calculate the depreciation of them. Now the question is what is the Annuity Depreciation Calculation. It is a method to calculate rate of return that is earned by your asset.
This method of calculating depreciation shows you the depreciation value that is caused by something other than time. We can take a car for example; a car, as it depreciates on miles driven. In other words, if an asset is losing its value constantly during its useful life then the method used for measuring this expense is annuity depreciation method.
The annuity depreciation calculator lets you do this calculation quickly. It gives you a chart showing expense of depreciation as usage and value. Using it is quite simple, you are only required to add the following details to know the usage depreciation and value depreciation of the asset.
(Note: The correct measure for usage and increment can be selected from the dropdown list while using iCalculator's annuity depreciation calculator)
This method is used to compute constant rate of return on an asset. Below are the steps that should be followed for the calculation.
Computation of depreciation is a complex and time-consuming process. The calculator can help you in many ways.
This method is generally quite useful for calculating depreciation expense of high cost assets that have long life spans. It is generally used for assets like properties and buildings that are on lease, cars and other commercial vehicles, etc.
The other advantage of using this method is that it considers 'interest on capital', which many other methods of calculating depreciation fail to take into account. This method is considered the most exact and precise due to such factors.
Depreciation calculation becomes a bit complicated for the assets where frequent additions, dismantling occur. It is not suitable for assets like machinery or industrial equipment.
It can be troublesome to profit and loss accounting over time because of diminishing rate of depreciation each year.
Also, even though it gives precise and exact results by using interest on capital but the rate is random and not in accordance with law.
At the end, we can say that annuity depreciation method is a very powerful tool when used properly. It can help you make wise decisions for the future and gives better financial understanding about your assets in use.
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