Depreciation can be accrued according to the output of a fixed asset or, in the case of a transport vehicle, according to the distance traveled. The depreciation calculation is based on the manufacturing capacity of the asset or the distance traveled.

As an example, assume that your company acquired a manufacturing installation that produces polyethylene boxes, at a purchase price of 160,000 RUB. Over a period of four years, the factory is expected to produce 320,000 boxes. Production is spread over this period as follows: in the first year, 100,000 boxes will be produced; in the second year, 60,000 boxes; in the third year, 90,000 boxes; and in the fourth year, 70,000 boxes.

Note

This example can also be used to calculate depreciation of transport vehicles by substituting units of distance traveled for production units.

The following table shows the depreciation accrual over the four-year period. At the end of the fourth year, the manufacturing installation is fully depreciated.

Year

Net book value at the start of the year

Production Quantity

Depreciation (RUB)

Net book value at year end

1

160,000

100,000

160,000*(100/320) = 50,000

110,000

2

110,000

60,000

160,000*(60/320) = 30,000

80,000

3

80,000

90,000

160,000*(90/320) = 45,000

35,000

4

35,000

70,000

160,000*(70/320) = 35,000

0

The quantity produced or the distance traveled within a defined period is entered into the fixed asset record.