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Former Member

depreciation

hi,

may i know what is the difference for

financial depreciation and book depreciation? do they have difference?

kindly provide example if there is difference.

thanks

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3 Answers

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    Former Member
    Aug 31, 2008 at 07:00 AM

    Hi,

    The Book Depreciation expense is the amount recorded on the u201Cbooksu201D and reported on the financial statements. This depreciation is based on the matching principle of accounting. For example, if a machine costs $500,000 and is expected to be used for 10 years and to have no salvage value at the end of the 10 years, the annual depreciation expense might be $50,000 each year. (This assumes the straight-line method and that the machine was acquired on the first day of an accounting year.)

    The tax depreciation is recorded on the companyu2019s income tax returns and will be based on the Internal Revenue Serviceu2019s rules.

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    Former Member
    Aug 31, 2008 at 07:43 AM

    Hi,

    Book Depreciation - actual depreciation posted in books of accounts for your statutory reporting.

    Financial Depreciation - for your internal reporting requirement. This may vary depending on the business/mgmt decision. This will give the mgmt, the actual profit & loss, based on the actual use of assets for the operations

    Rgs

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    Former Member
    Aug 31, 2008 at 10:00 AM

    Book Depreciation and Financial Depreciation are two types of asset valuations. Normally Book Depreciation is used for legal reporting based on statutory depreciation rates and useful lifefor each type of asset.

    In Financial Depreciation, method of depreciation (straight line, WDV, etc..) depreciation rate and useful life is decided by management.

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    • Former Member Former Member

      The nomenclature and purpose of Financial depreciation is depends on management. Based on nomenclature i understand it is used for Cost calculation only.