Depreciation calculation is the systematic allocation of the depreciable amount of a fixed asset over its useful life. For an accountant in Kazakhstan, the practical task is to determine the asset’s parameters, select a justified method, establish it in the accounting policy and regularly record the calculated amounts in the accounts. At the same time, accounting depreciation must be distinguished from depreciation deductions for fixed assets for tax deduction purposes: the tax calculation procedure is established separately (Article 280 of the Tax Code of the RK).
How Depreciation of Fixed Assets Is Calculated
The calculation begins with determining the asset’s accounting parameters. The accountant needs the value accepted for calculation, the residual value, the useful life and the selected method. The depreciable amount is determined based on the adopted valuation of the asset and its residual value in accordance with the organisation’s accounting policy.
Before the first depreciation charge, it is important to check whether the asset has been recognised, whether it is ready for use and whether its accounting parameters have been completed. The commencement and cessation dates for depreciation, as well as the procedure for accounting for periods when the asset is temporarily not in use, are determined in accordance with the accounting rules applied by the organisation and established in its accounting policy. The calculation must be based on properly executed documents confirming the recognition and use of the asset.
The answer to the question “is depreciation calculated?” depends on the classification of the asset and the accounting parameters established for it. The mere presence of an asset on the balance sheet does not by itself determine the calculation procedure: the accountant considers the asset’s purpose, condition, useful life, residual value and the subsequent measurement model applied.
A change in the useful life, residual value or method is recognised from the date established by the accounting rules and accounting policy. In the information system, it is necessary to check the date from which the new parameters apply: it is determined by the settings and the document used to register the change. Before performing the calculation, the accountant should verify which indicators the software uses in the current period.
Depreciation Methods and Approaches
For accounting purposes, the depreciation method is selected based on the pattern in which the asset’s economic benefits are consumed. The accounting system may apply the options provided for by the configuration in use and the organisation’s accounting policy:
- the straight-line method calculated based on the useful life;
- the straight-line method using the established rate;
- the diminishing balance method;
- the sum-of-the-years’-digits method;
- the units-of-production method based on the volume of use or output.
Direct, or straight-line, depreciation involves the even allocation of the depreciable amount over the established useful life. When checking the result, the amount must be compared with the asset’s cost, residual value, useful life and the parameters entered in the fixed asset record.
Under the units-of-production method, the calculation is linked to a verified measure of the asset’s use or output for the reporting period. The diminishing balance method and the sum-of-the-years’-digits method allocate depreciation across periods differently from the straight-line method. The selected option is applied consistently and changed only where there is a properly documented basis.
Settings for allocating the annual amount by month should be applied only when they are provided for in the accounting policy and correctly reflect the use of the asset. If the software uses an annual schedule, the accountant checks its coefficients and the resulting allocation. Field names, documents and the completion algorithm may differ depending on the configuration version.
A different procedure applies for tax accounting. Depreciation deductions are calculated for each asset in group I, while for groups II, III and IV they are calculated for the group as a whole by applying the rate established by the taxpayer in the tax register to the tax written-down value at the end of the tax period. The rate must not exceed the limit for the relevant group: 10% for group I, 25% for group II, 40% for group III and 15% for group IV (Article 280 of the Tax Code of the RK).
Depreciation Calculation in 1C and Verification of the Calculation
In 1C, it is necessary to check the fixed asset record, the recognition date, depreciation method, useful life or rate, cost, residual value and other completed parameters. If the organisation applies an allocation schedule, its selection and the monthly coefficients are checked additionally. The location of commands and the set of details should be determined using the interface of the installed configuration release.
After completing the scheduled depreciation calculation, it is useful to generate a breakdown by asset and check:
- which fixed assets were included in the calculation;
- whether the cost and parameters match the accounting documents;
- whether the depreciation method is specified correctly;
- whether the schedule established for the asset has been applied;
- whether the amount corresponds to the asset’s period of use;
- whether there is any duplicate depreciation charge or unjustified omission of an asset.
When a fixed asset is revalued, the accountant records the transaction using the document provided for by the configuration in use and checks the original or revalued amount, accumulated depreciation and transaction date. Automatic completion of the document does not replace reconciliation with the revaluation decision, accounting policy and data for each asset.
Revaluation may change the amount used for subsequent accounting depreciation. Recognition of the result depends on the history of the asset’s previous revaluations and the accounting data. After posting the transaction, it is necessary to check the new amount, accumulated depreciation and the parameters that will be applied in the next depreciation calculation.
For tax accounting purposes, the accountant does not automatically transfer the result of an accounting revaluation into the calculation. The tax deduction is determined based on the tax written-down values of assets and groups of fixed assets recorded in the tax register, using the rates established by the taxpayer within the limits provided for by the Tax Code of the RK (Article 280 of the Tax Code of the RK).
Depreciation Has Been Charged: Entries and Accounting Checks
The phrase “depreciation has been charged” means that the amount for the period has been recognised in the accounts and the asset’s accumulated depreciation has increased. The general logic of the entry is a debit to the relevant expense account or the cost of another asset and a credit to the accumulated depreciation account.
There is no single universal entry for all assets. The debit account depends on where and for what purpose the fixed asset is used: in production, administrative activities, sales or the creation of another asset. Therefore, the depreciation entry is selected taking into account the purpose of the specific asset, the accounting policy and the organisation’s working chart of accounts.
Before closing the period, the accountant should reconcile the entry with the department, expense analytics, fixed asset record and documents confirming its use. If the asset is used in several areas, the procedure for allocating the amount between them must be justified and established in the internal accounting rules.
Changes in the useful life, residual value and method require particular attention. The final amount should not be replaced with a manual adjustment without a properly documented basis. First, the asset’s new parameters and their effective date are registered, then the information system settings are checked, and only after that is the calculation performed.
Depreciation deductions are recorded in the tax register separately from accounting entries. For group I, the calculation is performed for each asset; for groups II, III and IV, it is performed for the group. The calculation is based on the tax written-down value at the end of the tax period and the rate established by the taxpayer within the limits of the Tax Code of the RK (Article 280 of the Tax Code of the RK).
Frequently Asked Questions
Is depreciation calculated for all fixed assets? — The procedure is determined by the asset’s classification, condition, purpose and the adopted accounting policy. The recognition date and depreciation parameters must be checked for each asset.
Which depreciation methods can be used in 1C? — The available options depend on the configuration and its release. The method selected in the software must comply with the accounting policy: it may be the straight-line method, the units-of-production method or another method provided for by the policy.
Which entry is used when depreciation has been charged on fixed assets? — Accumulated depreciation is recognised on the credit side, while the debit account is selected based on how the asset is used and the organisation’s working chart of accounts.
How is seasonality taken into account when calculating depreciation? — If the accounting policy provides for allocation based on seasonal use, the relevant schedule and monthly coefficients are checked in the software. They must be justified by the nature of the asset’s operation.
When is the new calculation applied after parameters are changed? — From the date determined by the accounting rules, accounting policy and change document. In the software, it is necessary to check the period from which the registered parameters are included in the calculation.
Is accounting depreciation the same as the tax deduction? — These are separate calculations. For the tax deduction, depreciation deductions are determined for an asset in group I or based on the tax written-down value of groups II, III and IV, taking into account the established maximum rates (Article 280 of the Tax Code of the RK).
Regulatory Basis
For tax accounting of fixed assets, the procedure for calculating depreciation deductions established by Article 280 of the Tax Code of the RK is applied. The accounting calculation is performed separately in accordance with the organisation’s accounting policy, while differences between the accounting data and the tax register are reviewed when closing the reporting and tax periods.