Depreciation and Amortization to Reduce Tax Burden

[Suba]

Depreciation and amortization are methods for reducing assets but depreciation focuses on tangible assets such as office equipment, production machines, buildings etc. while amortization focuses on intangible assets such as patents, goodwill, brands, etc.

In general, the lifespan of office equipment is five years (depending on tax regulations in your country), so if you buy a laptop for office/business equipment for $1000 then if we calculate depreciation for five years using the straight line method the annual depreciation is $200 as operational costs per year which will reduce the profit before tax in the income statement. So have you applied depreciation to your business?

 

[Starmix]

There's nothing to depreciate in my business. I am so sure those big businesses and at the university where I work the admin mandated the property custodian to compute the depreciation value to be presented to the Commission on Audit (COA) , since our university is owned by the national government.

 

[Suba]

Does your business not use equipment such as cash registers, tables, chairs, printers and other equipment so there is nothing to depreciate or perhaps the depreciation has been calculated by the franchisor.

 

[Starmix]

No, there's no table on my business only the cash registers. People buy and go the space rented is good only for the stuff and staff. But in other malls, the mill tea sellers rented a bigger space where tables and chairs are there. I disallow it for it requires additional staff. I am still adjusting and observing the flow of sales.

 

[kerryjoy]

Yes, depreciation is a common practice in my business for tangible assets like office equipment.