Depreciation (bookkeeping)

Depreciation is indirect costs

Depreciation is considered an indirect cost. Indirect costs are expenses that cannot be directly traced to a specific product, service, or project. Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. While the cost of acquiring an asset (such as machinery, vehicles, or equipment) is a direct cost, depreciation represents the portion of that cost allocated as an expense over time.

What do do after full depreciation?

Case: An iPad has been fully depreciated. Its residual value is only € 90,75. What to do? Keep it on the balance sheet for this small amount, or apply a one-time cost? Both options are possible, and both approaches have their advantages and disadvantages:

Keep on the balance sheet

• You can choose to keep the iPad on the balance sheet at its residual value of € 90,75. While the asset has no further impact on depreciation, it is still accounted for on the balance sheet.
• This approach might be suitable if the asset is still in use or if you want to maintain a record of all assets, regardless of their book value.

Write off as a one-time cost

• Alternatively, you can choose to write off the remaining value of € 90,75 as a one-time cost. This means you would recognize the expense in the accounting period in which you decide to remove the asset from the books
• Writing off the remaining value can simplify your balance sheet and may be appropriate if the asset is no longer in use or if the administrative burden of maintaining it on the balance sheet is not justified.

Conclusions

I'll keep it on the balance sheet, so it's somehow accounted for