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What does it mean that an asset is depreciable? How can I deduct the cost of a fixed asset?

Last updated: March 26, 2024

The difference between the expense of a current good and a fixed asset is that while with the first one, as it could be a pencil, the expense is recorded at the same moment in which we receive the invoice, in the case of the fixed assets this cost will be "depreciated". 

Bear in mind that a fixed asset is an expense on a good that is going to be used for your economic activity for more than one year. For example, if the year in which we buy the laptop we deduct 100% of its cost, we are not correctly allocating the expense to each period of effective use, since according to the accounting rule we should divide the cost in the number of years that the good is going to be effectively used.

Let’s use an example to clarify this. If you buy a 1,000€ laptop on January 1st of the first year, the following breakdown will be included in the result of your economic activity during the following 4 years: 

  • 1st year: 250€

  • 2nd year: 250€

  • 3rd year: 250€

  • 4th year: 250€

As you can see with this example, you are apportioning the expense within the number of years the good will be used.


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