Depreciation:

Fixed assets lose their value even as they continue the function and contribute to the
engineering project that use them. This lost value is called depreciation.
Most assets lose their value over time and must be replaced once the end of useful life
is reached.
Depreciable property:
1. Tangible Property
a) Personnel
Machineries
Furniture
Vehicles
b) Real
Land
2. Intangible Property
a) Goodwill
b) Trademark
c) Copyright
Depreciation is classified as:
1. Economic depreciation:
Reduction in assets capacity to perform its intended service due to physical
impairments (corrosion, chemical changes, wear and tear)
2. Functional depreciation:
Due to change in organization of its technology that decrease or eliminates need
for assets.
Cost basis: Initial cost of acquiring assets(purchase price + tax + transportation and
other cost like installation)
Market value: The amount that will be paid by the buyer to the seller for property
under no compulsion for buying and selling.
Recovery periods: It is the depreciable life of the assets in year.
Salvage value: The estimated value of property at the end of useful life.
Book value: The worth of depreciable property as shown in accounting record of the
company.
So, book value = cost basis – depreciation amount
Methods of depreciation:
1. Straight line depreciation.
2. Sum of year digits(SOYD)
3. Declining Balance method
4. Sinking Fund method.
5. MACRS.

Income tax: Income tax are assets as a function of gross revenue minus allowable
reduction.
Property tax: Are assessed as a function of value of property owned such as land,
buildings, equipment, etc.
Sales tax: Are assessed as a basis of purchase of goods and services.
Excise tax: It is the tax that is levied by the government for the goods and products
that are manufactured inside the country.
Taxable income=Gross revenue-all expenses except investment-deduction
Income tax= tax rate * taxable income
Net income after tax(NIAT) = Taxable income-Income tax