Aqid ERPMeaning
Depreciation (الإهلاك) charges a fixed asset's cost to expense over its useful life instead of in the month it was bought. The straight-line method, the usual one for small businesses, divides cost less residual value by the number of years; the reducing-balance method charges a fixed percentage of the remaining value, more in early years. Each month's entry debits depreciation expense and credits accumulated depreciation, a contra-asset that sits under the asset's cost on the balance sheet.
Useful lives are the company's estimate, documented in its policy: commonly four years for vehicles and computers, five to ten for furniture and machinery, twenty-five or more for buildings. For zakat and income tax, ZATCA's regulations set their own rate groups, so the tax computation may differ from the books.
Also called: straight-line depreciation · accumulated depreciation · الإهلاك
Example
A machine costing 50,000.00 with a residual value of 2,000.00 and a five-year life depreciates 9,600.00 a year, 800.00 a month. After three years accumulated depreciation is 28,800.00 and the net book value 21,200.00. Sold then for 25,000.00, it yields a gain of 3,800.00.