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Emma Rudd BMA




Business Finance ­ Depreciation _
Nature of Depreciation
A business may spend its capital in two broad ways:

Revenue Expenditure Capital Expenditure
Explanation This is spending on assets that This is spending on fixed assets
are used up in a relatively short that will be used by…

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Emma Rudd BMA




The reducing balance method of depreciation lowers the value of a fixed asset by a given percentage
each year. Because the value of the asset is declining over time, this means that the value of which the
asset is reduced declines throughout its life. The key factor…

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Emma Rudd BMA




Wider Effects Business may look unattractive to This may make the company
prospective investors. Tax more attractive to investors but
liability on profits may be will also increase tax liability.
reduced, but Inland Revenue
might investigate. Business may
record surplus when asset finally
sold.
















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