Six-Year Depreciation Plan: Analyzing Financial Impact - Research Paper

Introduction

In a company, the expenditure can be recognized and analyzed after the asset has been put into operation, it is therefore calculated for every financial year and reported based on accumulated depreciation. The amount of depreciation reflects on the value of the asset based on the time that has been in use (Chavada, 2016). Based on this concept, the financial impact is the fore determined using the convergence plan. This paper, therefore, describes the usefulness of a six-year depreciation plan for capex to determine financial impact.

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Typically, depreciation is calculated by subtracting the salvage value of an asset from the value of its usefulness since it was put in use. There are various methods of calculating depreciation, and the best method is using the six-year depreciation plan for capex. This plan is more critical as it identifies the effect of the financial statement. A six-year depreciation plan for capex is worth applying as it precisely determines the financial impact in six years and can work best for long-life assets.

A six-year depreciation plan for capex is one of the best methods used to calculate and analyses the financial impact of an asset; this method, therefore, is useful as it can determine long-term financial impacts on capital expenditure. Capital expenditure refers to the value of inquiring, marinating, and upgrading of a particular physical asset (Chavada,2016).

The plan utilizes an important financial statant such as cash flow statement, which implies that to determine the financial impact of an asset does not require much calculation as this statement contains analyses data that helps to find the value of depreciation in the long run. This plan is also useful in determining that may lead to an increase in the value of an asset in an organization

six-year depreciation plan for calculating capital expenditure is useful in determining the value of the new fixed assets and the existing assets of a company in order to maintain the business and make decisions on how to acquire new assets withing an extended period. This plan is efficient, and it is known as one of the bets budgeting operations that a company can apply to ensure the success of the projects. The plan is structurally constructed to reduce the time consumption and the cost of implementation to ensure that capital expenditure and budgeting are efficient (Zamfir, 2017).

Determining the usefulness of an asset over a long period helps the company to decide how and what to acquire in future, six yaar depreciation plan, therefore, is useful to calculating capital expense since this element of business is reflected on the substantial company investment of cash meant to provide a positive return, in the long run, it is essential for a company to consider using this plan ti determined capital expenditure over a long period. capital expense plays a vital role in the company, therefore using the best plan to determine financial impact is essential

In an organization, the convergence plan has a significant impact in the financial sector, and it is, therefore, important to use a precise depreciation method to determine the value of an asset. There are different dimensions of convergence plan in the financial operation of an organization. However, the emphasis is more on the deprecation value of an asset (Zamfir, 2017). A six-year depreciation plan has reduced the problems associated with the bottom -line analyze of income. Furthermore, budgeting software can be used to determine financial income, is, therefore, applicable as it captures accurate data and reliable outcomes.

References

Chavada, M. M. M. (2016). Analyzing capital expenditure in commercial real estate assets (Doctoral dissertation, Massachusetts Institute of Technology).

Zamfir, M. (2017). THE FINANCING PLAN-TOOL FOR ANALYZING LONG TERM DEVELOPMENT PROGRAMS WITHIN ECONOMIC ENTITIES. The Annals Constantin Brancusi'University of Targu-Jiu. Economy Series, (6).