How To Account For Depreciated Photography Equipment
No matter how well you take care of your cameras, lenses, lighting equipment, tripods, and more, your equipment will depreciate. There will come a time when it’s completely depreciated and might not be further suitable for use.
What Depreciation Looks Like
Depreciation is a method in which you account for the gradual value loss of an asset. You’ll account for this on your balance sheet.
Every business needs to account for depreciation. Without it, you won’t know what your photography business is truly worth. You also won’t know if you need to replace any of your assets and therefore account for it in your budgeting. Knowing when you need to replace assets can be an important aspect of your accounting.
How to Track Depreciated Photography Equipment
There are three main ways you can account for depreciated photography equipment. The first is through usage. The second is fixed over a certain amount of time or straight line. And the third is fast depreciation or double declining.
Depreciation by Item Usage
The more you use an item, the more likely it will lose value. Let's say you estimate your lighting rigging will last you 200 jobs. You can then divide its value by 200. Each time you use it, your asset depreciates by that value until it reaches zero.
Straight-line depreciation is the most common method of depreciation, and it’s the easiest way to depreciate photography equipment. It works by taking the following steps:
- Determine the cost of your individual asset.
- Subtract the salvage value from the initial cost. This will be the overall asset cost you use in calculations.
- Figure out its lifespan. You can do some research to see the standard expected lifespan for other pieces of equipment like it would be.
- Divide the asset value by the years of useful life you expect to get from the asset.
The amount you receive is how much your asset will depreciate each year.
Double Declining Depreciation
Double declining depreciation is an accelerated version of depreciation. This form of depreciation is used when assets are most likely to see their usefulness play out during the first few years of their lifespan.
Calculating it is done through multiplying equipment book value by a multiple of straight-line depreciation.
Specifics of Equipment Depreciation
There are specific guidelines as to what you can depreciate. You have to own the item you’re depreciating, so you can't depreciate it if you’re just renting or leasing something.
Other qualifiers include:
- Using it in your business
- Determining useful lifespan
- Lasting longer than a year of use
When it comes to photography equipment, some things are more likely to depreciate quickly than others. Your camera is likely to have a faster time span usage since it’s one of the most used pieces of equipment in your studio. Other assets you use consistently will also depreciate faster than assets you use occasionally or only for special jobs.
And our asset management software can help you track straight-line depreciation for each item. You can set reminders and flags in the system to account for depreciation by usage. You can also set reminders to notify you if you need to check the depreciation usage on a regular basis. That way, if any errors occur, you can catch them before they ruin your budgeting system and give you the incorrect value for your photography equipment.