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Business Numbers Didn’t Have to Be This Hard · Chapter 12

Depreciation

Spread the cost of a long-lasting thing over the years you’ll use it. Add its running costs and divide by the hours it works to see what it costs per hour.

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From the book, Chapter 12. Leo’s van: ($36,000 − $6,000) ÷ 6 = $5,000 a year, so $21,000 of book value after three years. With $7,000 of fuel, insurance and servicing, it costs $10.03 for each of his 1,196 billable hours. Tax rules have their own versions of depreciation: ask an accountant.

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