Advantages of depreciating your PPE

Hello readers, today I will be writing about the benefits of depreciating  your property, plant and equipment (PPE). I hope you are all good. 

Companies buy properties, plants and equipments, as the PPE is being used it starts to wear and tear. Therefore, value of the wear and tear is deducted from the cost of the asset. The deduction is known as depreciation which is posted as an expense in the income statement also known as profit and loss account. There are different methods of calculating the depreciation but I will not be writing about that today. Insha Allah (if Allah wills) I will write about the methods in another article. The advantages are below:

Depreciating your PPE while deducting it as expense will help keep money aside to buy a new property or plant or machinery when previous ones need replacements. Some people know about depreciation but do not know is a way of setting money aside to buy a new fixed asset.

Another benefit is tax reduction. Without deducting depreciation as an expense in the profit and loss account your tax will be higher, the higher the profit before tax the higher the tax paid. Thus, the profit will be lower when you deduct the depreciation, making the tax to be paid lower.

Lastly, depreciation helps you to be informed about the revenue the fixed asset generates since the depreciation expense are matched with the revenue.

Make sure your business is halal. Everything should be done seeking the pleasure of Allah. Part of seeking the pleasure means hoping for a reward from Him in this life and the Hereafter. Everything happens according to the will of Allah (you have freewill, therefore, you are responsible for your actions).

Halal means anything lawful Islamically.

Alhamdulillah (Praise be to Allah). May Allah send peace and blessings to Prophet Muhammed (P.B.U.H). Thank you for reading this article. Like this page on facebook. Keep reading this blog regularly. Cheers!