A depreciation schedule outlines how the value of construction assets—such as machinery, tools, and vehicles—declines over time. It helps companies spread the cost of long-term assets across multiple accounting periods to reflect their usage and wear.
How a Depreciation Schedule Benefits Construction Companies
By systematically accounting for asset depreciation, companies can accurately report financial performance, optimize tax deductions, and plan for future equipment replacements.
Common Depreciation Methods
- Straight-line depreciation, where assets lose value evenly over their useful life
- Declining balance depreciation, which applies a higher expense in early years
- Units of production depreciation, which ties depreciation to actual usage levels
Related Terms: Capital Expenditures, Fixed Assets, Equipment Lifecycle Costing, Financial Reporting
FAQs
How is depreciation different from maintenance costs?
A: Depreciation accounts for an asset’s loss in value over time, while maintenance costs cover repairs and upkeep.
Can depreciation affect project costing?
A: Yes, depreciation expenses are often allocated to project budgets when equipment is used.