Depreciation: how do you handle them?

General
1

Depreciation is important. If you don’t do them and just go

2024-01-01  Chevy | Bought a car
    assets:car:chevy                50,000 USD
    liabilities:lorem                50,000 USD

you’ll end up facing $50k expense at the day you sell your car, making your income statement pretty stupid.

But it’s tedious work to deal with PTA more or less. There seem to be some scripts written for this but I was wondering how everyone’s dealing with it.

I personally have no such big of an asset so just do it monthly manually but I’m willing to write better script for it(with Go!).

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2

I feel doing it yearly is less taxing — say, ⅕ of the car per year — and still precise enough to be useful.

Companies do depreciations yearly.

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3

One of my asset gets removed(complicated) in about 5 months from now. It’s about 3k and it was way too significant of an expense to just go one-timer.

Thank you for your input anyways!

4

In my case, since I can’t tax depreciation of my card, the only purpose of depreciation is to extend the expense of depreciation among years for my personal interest. So, in this case, I do not want to estimate depreciation yearly. I prefer to wait until I sell or discard the car in order to attribute the depreciation expense to each year.

When I buy the car:

2020-01-01 buy car
    assets:properties  1 CAR @@ 30000.00 EUR
    assets:cash

If I want to track an estimation of the value of the CAR to estimate better my net worth:

P 2020-12-31 CAR 27000.00 EUR
P 2021-12-31 CAR 24000.00 EUR
P 2022-12-31 CAR 21000.00 EUR
P 2023-12-31 CAR 18000.00 EUR

But when i sell the car, I can exactly put the depreciation per year:

2024-06-30 sell the car
    assets:properties  -1 CAR @@ 30000.00 EUR
    assets:cash  21000.00 EUR
    expenses:car:depreciation  2000.00 EUR ; date:2020-12-31
    expenses:car:depreciation  2000.00 EUR ; date:2021-12-31
    expenses:car:depreciation  2000.00 EUR ; date:2022-12-31
    expenses:car:depreciation  2000.00 EUR ; date:2023-12-31
    expenses:car:depreciation  1000.00 EUR ; date:2024-06-30

It is a method I found years ago in PTA subreddit.

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5

That’s a neat way. It’s not about taxes for me either. Thank you for sharing this!

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6

how do you calculate the depreciation values each year when you sell the car? because the values are different from the P values.

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7

Price values (P directives) are my yearly depreciation estimation. For example, I buy a car for 30000 EUR and I estimate that ten years later it would value 6000 EUR so my price values drop at 2400 EUR per year during 10 years.

But this a personal estimation.

If I finally sell my car after 5 years per 20000 EUR, I lost 10000 EUR in 5 years so I actually had 2000 EUR depreciation per year during 5 years although my estimation was 2400 EUR.

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8

And please take into account that this method is only valid for personal finances. Because anual books should reflect the estimated value of assets and previous annual books should not be modified in corporate finances. Depreciation is to reflect the current value of assets. If you understimate depreciation you will have a capital loss at selling and if you overstimate you will have capital gains at selling.

Since I am doing book keeping for personal finances, i can wait to set the depreciation per year until I know exactly what is the real depreciation and avoid the final capital gain/losses due to divergences between the estimation and the real depreciation.

9

i got the idea that you distribute the value difference across the years equally.

the irregular values (2000 then 1000) is what threw me off, i got the feeling you were calculating them somehow.

10

Not OP but it’s just (2000 / 12 ) * 6. Last transaction was in 6/30. That’s how corporate does either.

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