Soar & Heritage Bookkeeping Training for SMEs Below is one of the pre-training sessions for the above training -------------------------------------------------------------------------------- Pre-Training Session: Depreciation Hello Class, Today, I want to introduce you to Depreciation. Let me ask you: The last time you bought an asset such as a printer, an AC, a piece of furniture or a car for your business, how did you treat the expenses? Many SMEs simply pass the cost of the asset to their P&L account for that month. Period! And later complain I didnt make profit in January because I bought some ACs & Printers which took away my profit for the month. These are the Chidis who equate Profit with cashflow!!! (Note: Chidi, the business guru is a case study earlier shared in the pre-training session) Non-current assets are expected to serve your business for a period more than 1 year. So what you do when you buy an asset for your business is to spread the cost of the asset over the period which the asset will be useful to the business. For example: if your HP Laserjet printer cost N48,000 and you expect it to serve you for 4 years. Instead of passing N48,000 as an expense in the month of purchase, you simply divide N48,000 by 48 months (4 yrs x 12 months) and charge a monthly expense of N1,000 for the asset for the next 4 years into your monthly Profit & Loss account. By 1 year after the purchase of the asset, you would have charged N12,000 to P&L as an expense on the asset. The N1,000 monthly or the N12,000 annually that you charge to your P&L is called Depreciation expense on the asset. So if your practice has been to pass the entire cost to your expenses as explained above, you are simply doing the wrong thing. Note must be taken that we depreciate ONLY Fixed/Non-current Assets. We dont depreciate current assets. ------------------------------------------------------------------------------- Register for our Bookkeeping Training for SMEs: Dates: March 18th & 19th Fees: N18,000 Venue: 76, Ogudu Road, Ogudu Lagos State Visit soarandheritage.org or call 08093578789 or 07056775574 for details & registration.
Posted on: Tue, 11 Mar 2014 15:42:49 +0000
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