Question

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

Answer 1

In many cases unless you have very sophisticated accounting software or a fixed assets module that will automatically calculate depreciation rate for you.you will be calculating depreciation manually , and later entering it in to the appropriate journal or as a journal entry in your accounting software.

Recording depreciation will affect both your income statement and your balance sheet . Recording depreciation is considered an adjusting journal entry, which are the entries that are completed prior to running your adjusted trial balance.

In many accounting software applications that do not have the capability to tracked fixed assets you will be recording depreciation expenses manually.

Unless you have a fixed asset module or add on application that works with your accounting software , you will still have to enter depreciation totals manually as a journal entry in to your accounting software .

For the reason most small business owners will find that straight line depreciation is the simplest method to use.