Glossary
Depreciation
Definition
Depreciation spreads the cost of a fixed asset over the years it is used. Each year an expense is recorded and the value of the asset in the books goes down. The rules for the rates and methods are set in the accounting rules.
Example. Equipment bought for €3,000 and written off over three years, in a simple straight-line method, costs €1,000 a year in depreciation.
Why it matters for your company
A laptop or a van bought for a large sum would make one year look poor if you expensed it at once. Depreciation matches its cost to the years in which it earns money.
Where you see it in Sapita
In the fixed assets part of the year-end checklist, where each asset gets its yearly depreciation.