Question

Discuss critically the challenges for a small business of calculating fixed asset
depreciation.

Answer 1

Small business owners tend to use personal property in conjuction with or as office property which is against the fundamental accounting principle of separate entity. Combining personal property in to business makes it difficult to demark the business usage and thereby calculating depreciation. Also, when personal property is put to use, the date of purchase of the asset and its estimated useful life is difficult to calculate and thereby estimating depreciation. Small businesses are usually managed by the owner i.e. the owner takes care of everything right from operations to book keeping. He/ she is most cannot be an expert in all areas and hence accounting for depreciation is a challenge. The businesses do not have the necessary funds to outsource accounting work and hire qualified staff.