How Depreciation Reports Help in Upkeep and Repair

In business, sunk costs are unavoidable. A sunk cost is basically a catch term for any equipment that costs businesses money they tend to keep for a while. Examples include computers, faxes, office furniture, the building itself, and the like. Now the thing with items like this is a business tends to acquire them and forget about it. Depreciation reports help avoid this. Those six new computers that are now old and without a review you'll have no clue what their value is and how they relate to the company overhead.

This is why depreciation reports are so important. Deprecation is an important business cost as it relates to value lost in a purchased item. For an easy example think of your car's deprecating value as time goes on. It'll never be worth what you paid for it (unless it's a rare collectable) but it still retains some value. The following reasons are why your company should get depreciation reports done.

Tax Benefits

This is a major one. Companies can claim a tax credit on the desperation value of their assets. In simplistic terms the loss of value is considered a business expense. The company needed equipment for day-to-day operations to continue, so this loss of investment value can be claimed. Interestingly this credit can be claimed in a few different ways depending on which makes the most sense for the business. The only way to know the credit you can claim is through depreciation reports. Plus simply knowing the total value for a business is important and this value includes everything owned by the business.

Equipment Lifespan

An annoying factor of property assets is it is always in flux. No one office had everything bought at the same time. Through depreciation reports you can get a good idea of how old the company assets really are. Remember company assets cover a lot of things. For example if the office computers have deprecated to practically no value you can replace them without losing the original investment. This is because any credits you could have claimed on the equipment has already been used by this point. If there is still some value left in the older equipment replacement may merely be scheduled at a later date.

So you might decide to buy new computing equipment on the grounds of increased functionality and further deprecation value you can claim throughout the life of the equipment. Outside of the costs realizing equipment in general is getting old could be reason enough for you to replace it. The key is that depreciation reports give you enough information to make a judgment.

Depreciation Reports Help Repair Plans

Upkeep is essential to any business. However no business can afford to repair everything at once. Any attempt at this would be disorganized and probably lead to catastrophic failure. In any large-scale operation you're going to need a plan. With repairs they are often done in phases. With depreciation reports you can plot out how you want to do the repairs. You can take several different approaches to this because everything deprecates differently.

The dulling exterior decoration may take a backseat if the building's internal wiring is due for regular repair work. You're going to want to clean up the outside paint job at some point but you know now that there are things that have to be replaced or repaired first. With depreciation reports you know what order to approach stuff like this in. While repairs are good fixing the outside while the store fuse box catches fire due to age is probably not a good idea.

at 12:40 AM
Back to Top