How is Depreciation determined for your Assets?

Depreciation is the decrease in value of an asset over time due to wear and tear, technological advancements, or other factors.

When you own assets like a car, a computer, or a piece of equipment, you know that over time they will start to lose value. This decrease in value is called depreciation, and it can have a big impact on your finances.

📌 Depreciation happens for a few reasons

• Simply Wear and Tear: as you use your asset, it will start to show signs of aging, which can make it less valuable.
• Technological Advancements: as new and better models of your asset are released, older models become less desirable and therefore less valuable.

How does it work on Modeliks?

The depreciation of assets is calculated using the straight-line method. You only need to input the asset's original cost and the number of months that it will be used.

✍️  Montly depreciation = Original cost of asset ÷ lifetime value of the asset in months.

Both depreciation and amortization are non-cash expenses, meaning they don't involve actual cash outflows from the company. They are accounting methods used to distribute the cost of assets over their useful lives, providing a more accurate representation of expenses and financial performance over time.