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Finance
08/06/2024

Amortization

Certain expenses are deductible from taxes. Amortization refers to the loss of value of an asset over a given period. Each year, it is possible to deduct the amount of this loss in value.

To record amortization, follow these steps in the Finances section:

  1. Click on “Add an expense”.
  2. Choose the type “Amortization”.
  3. Select the duration of amortization.
  4. Save the information by clicking on “Save”.

Rentila uses the straight-line amortization method. This method evenly distributes the cost over the amortization period. The calculation formula is: Annual amortization = Amount of the expense / Duration of amortization.

Examples of usage duration

Here are some examples of usage duration that you can apply to amortizable expenses:

  • Main structure: 75 years
  • Facade: 75 years
  • Electrical installation: 30 years
  • Waterproofing (windows): 25 years
  • Roofing: 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

Examples of calculation

To calculate the amortization of a fitted kitchen worth £10,000 over a period of 10 years, you can use the straight-line amortization method. This method evenly distributes the cost over the amortization period. Here is how you can calculate it:

  • Base amount of the expense: £10,000
  • Duration of amortization: 10 years
  • Start date of amortization: 15 June 2021

To determine the annual amortization, divide the total amount of the expense by the duration of amortization:

Annual amortization = Amount of the expense / Duration of amortization Annual ; amortization = £10,000 / 10 years Annual amortization = £1,000 per year.

Thus, you will amortize £1,000 each year for the 10 years following 15 June 2021. This means that for the year 2021 (the start year), you will amortize a portion of £1,000, pro rata. The calculation formula for the first year is: Base amount x Rate x (Time/360). So, in the case of the example: £1,000 x 100% x (16 + 30 + 30 + 30 + 30 + 30 + 30 / 360) = £544.44

For each subsequent year until 2031, you will also amortize £1,000.

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