A Depreciation records the depreciation of an asset in accounting. For assets with a limited useful life, the acquisition or production costs are generally spread over the estimated useful life. The abbreviation AfA stands for depreciation.
What does Depreciation mean?
Abschreibungs account for reductions in the value of assets. In the case of scheduled Abschreibungs, the value of an asset with a limited useful life is not fully recognised as an expense in a single period, but is spread over its expected useful life.
This changes the carrying amount of the asset in question over several periods.
What does AfA mean?
AfA means capital allowances. The term is used in particular in a tax context for the allocation of the acquisition or production costs of a depreciable asset over its useful life.
In short: Depreciation is the broader term for accounting. AfA specifically refers to tax depreciation.
Which assets are depreciated?
Planned Abschreibungs particularly relate to items of fixed assets whose use is limited in time.
This may include, for example, machinery, vehicles, technical equipment or certain intangible assets. However, not every non-current asset is automatically subject to systematic depreciation.
How do Abschreibungs affect Balance sheet and profit and loss statement?
A Depreciation generally reduces the carrying amount of the asset in question. At the same time, it is recognised as an expense in the profit and loss statement and thus affects the profit or loss for the relevant period.
A Depreciation should not be equated with an actual outflow of funds. The purchase or payment and the subsequent accounting entry for the Depreciation are different transactions.
Connection with the Fixed asset accounting
The Asset accounting It records fixed assets and documents, among other things, their acquisition or production costs, useful life, previous Abschreibungen and remaining book values.
Abschreibungen are therefore closely related to the Accounting and the Profit and Loss Statement.
