Depreciation
Some expenses are depreciable charges that can be deducted from tax. Depreciation is the loss of value of an asset over a given period. Each year, you can deduct the amount of that loss in value.
To record depreciation, follow these steps in the “Finance” section:
- Click “Add expense”.
- Choose the “Amortissements” type (depreciation).
- Select the depreciation duration.
- Save the details by clicking “Save”.
Rentila uses the straight-line depreciation method. This method spreads the cost evenly over the depreciation period. The formula is: annual depreciation = amount of the expense / depreciation duration.
Examples of useful life
Here are some examples of the useful life you can apply to depreciable expenses:
- Structural work: 75 years
- Façade: 75 years
- Electrical installation: 30 years
- Weatherproofing (windows): 25 years
- Roof: 25 years
- Heating: 20 years
- Plumbing: 20 years
- Interior fittings: 12 years
- Works: 10 years
- Fitted kitchen: 10 years
- Appliances: 5 years
- Furniture: 5 years
- Other small equipment: 5 years
Worked example
To work out the depreciation of a £10,000 fitted kitchen over 10 years, you can use the straight-line method. This method spreads the cost evenly over the depreciation period. Here is how to calculate it:
- Base amount of the expense: £10,000
- Depreciation duration: 10 years
- Depreciation start date: 15 June 2021
To find the annual depreciation, divide the total amount of the expense by the depreciation duration:
Annual depreciation = amount of the expense / depreciation duration
Annual depreciation = £10,000 / 10 years
Annual depreciation = £1,000 a year
So you will depreciate £1,000 each year over the 10 years following 15 June 2021. For 2021 (the start year), you will depreciate a pro-rata share of that £1,000. The formula for the first year is: base amount x rate x (time / 360). In this example: £1,000 x 100% x ((16 + 30 + 30 + 30 + 30 + 30 + 30) / 360) = £544.44
For each following year until 2031, you will depreciate £1,000 as well.
