Question

Discuss the benefits of using Excel for a depreciation schedule. What are the three types of depreciation methods?

Answer 1

The following are the benefits of using excel for a depreciation schedule

· Excel spreadsheet has inbuilt functions to calculate the depreciation needed for depreciation schedule. For example the SLN function gives the depreciation based on straight line method

· There is accuracy of calculation with no manual intervention needed

· It helps in calculating any changes and giving output faster. for example change cost of asset , life of asset, etc

· It helps in summarising and developing reports based on data base maintained in excel. For example: develop pivot tables,

· It brings in efficiency and saves time and costs of the organisation.

Three type of depreciation method

Straight line method:

This method calculates depreciation expense based on cost of asset minus its salvage value divided by the life of the asset.

Units-of-activity method:

This method calculates the depreciation expense based on units and gives depreciation at unit level to be charged. For example: kilometres for delivery vehicle, output for machinery used in production

Double declining balance method:

This method calculates depreciation at double the straight line method based on book value at beginning of each year.