What is depreciation?
When you buy something expensive for your business, like a vehicle or a laptop, you do not record the full cost as an expense straight away. Instead, you spread the cost over the years you use it. This is called depreciation.
Each month, a small portion of the cost is moved from your Balance Sheet to your Profit and Loss as an expense. Over time, the asset loses value on your books until it reaches its end-of-life value.
How Cybooks calculates it
Cybooks uses the straight-line method. This means roughly the same amount is charged every month.
Each month, Cybooks works out the depreciation like this:
Monthly depreciation = (Current book value - Residual value) / Remaining months
For a brand new asset with no depreciation yet, this simplifies to:
(Purchase price - Residual value) / (Useful life in years x 12)
Example
Detail | Amount |
Purchase price | EUR 12,000 |
Residual value | EUR 2,000 |
Useful life | 5 years (60 months) |
Amount to depreciate | EUR 12,000 - EUR 2,000 = EUR 10,000 |
Monthly depreciation | EUR 10,000 / 60 = EUR 166.67 |
After 5 years, the asset will be worth EUR 2,000 on your books (the residual value).
Why it recalculates each month
Because Cybooks recalculates from the current book value and remaining months each time, two good things happen:
Small rounding differences are spread out evenly instead of building up
If you change the useful life or residual value later, future months adjust automatically — no need to fix past entries
First month options
The averaging method (set on the asset type) controls how the first month is handled:
Full Month (default)
The asset gets a full month of depreciation, no matter what day you bought it. If you buy a laptop on the 28th, it gets the same first-month charge as if you bought it on the 1st.
Most businesses use this option.
Actual Days
The first month is adjusted based on the actual days left in the month.
Example: Monthly depreciation is EUR 300. You bought the asset on 15 March (31-day month). Days remaining: 17.
First month = EUR 300 x (17 / 31) = EUR 164.52
Every month after the first gets the full amount.
When does depreciation start?
Depreciation starts from the date you set in the Start tracking value from field when creating the asset. By default, this is the purchase date. You can set it later if the asset was not put to use straight away.
Example: You buy machinery on 1 January but it is not installed until 1 March. Set the purchase date to 1 January and the start tracking date to 1 March.
When does depreciation stop?
Depreciation stops when one of these happens:
The book value reaches the residual value – the asset is fully depreciated
You dispose of the asset (sell, scrap, donate, or exchange it)
You delete the asset (to correct a mistake)
Assets that do not depreciate
Land is the most common example. It generally does not lose value, so there is no depreciation. When an asset type has no Depreciation Expense Account set and the asset has a useful life of zero, it skips depreciation entirely. It stays on your Balance Sheet at its original cost.
How depreciation shows in your reports
Report | What you see |
Balance Sheet | The asset value goes down each month |
Profit and Loss | Depreciation expense goes up each month, reducing your profit |
Trial Balance | Both the expense and accumulated depreciation accounts reflect the charges |