Many businesses make use of assets. These are the ‘things’ the business has, they could be cars, pieces of furniture or buildings. Each one of these things has a value, a value which is always rising and falling. It could be rising quickly or rising very slowly, but it is always variable, and as such its momentum can be taken advantage of.
Sometimes assets can lose value quickly. When this happens the cost of an asset rises at an increased rate, making it more expensive to keep hold of, and less valuable to the business.
This decrease in value can be taken advantage of using accelerated depreciation. This is a depreciation method which takes advantage of the falling book value of an asset. This book value falls faster than the traditional straight-line method allowing for greater deductions in the earlier years of an asset, this can then be used to minimise taxable income.
Posted in: Business Financing