The Value of Depreciation in a Smaller Business enterprise

Small business success always starts with an idea. Whether your budget is big or small, a marketing strategy can be implemented and geared towards your business specific needs. Delegating tasks to others should be one of small business owner's main priorities. Clear, individual roles within the business should be established early on.

Whether your company is in retail business or offers intangible services, a central location exposes your business to a greater amount of foot traffic.

Overall it takes time to become successful small business owner.

Keys to Starting a Small Business

Depreciation is one of those key factors that many new business owners over look due to the idea that it is complicated accounting structure.

Depreciation is calculated by estimating a salvage cost for any piece of equipment then subtracting that amount from the cost of the asset. This depreciation value, however, is only the beginning. The real work comes with the method of depreciation. There are two main types of depreciation. The first is straight line depreciation. With straight line depreciation the depreciation value subtracted from the asset value remains constant every year. While the second is the accelerated depreciation method, sometimes called the double declining method, uses a percentage to calculate the asset depreciation value each year. By doing this the asset is depreciated much faster than with straight line depreciation.

On a companies balance sheet depreciation is represented with a depreciation expense account and an accumulated depreciation account. The accumulated depreciation account is a contra asset and the balance in this account is the cumulative total of the depreciation.