The cost of a machinery/equipment or furniture has to be depreciated over the period of its useful life. (See Amortization and Depreciation for details). The period of the useful life of a machine or equipment, including furniture, is generally between 3 to 5 years. However for high cost machines like a CNC machining center used for precision engineering works, the useful life may be extended to beyond 5 years. This is to spread out the high cost over a longer period to make the annual depreciation more reasonable. Having a lower depreciation amount annually enables one to price the product or service more competitively to cover this lower overhead.
The basic version of the app sets the period of depreciation at 3 years or 36 months. This is to simplify calculations and enable a fast assessment of the viability of the start up. It is acknowledged that some users may find this fixed depreciation period too rigid and not suitable for their use. There is therefore a way to work around this fixed depreciation period. Assuming you have a machine that costs $300,000 that you intend to depreciate over 6 years. What you can do is to state that the machine costs $150,000 and depreciate it over the fixed period of 3 years. Say you have PCs costing $1,500 each that you intend to depreciate in a year. Depreciating them over the fixed 3 years simply spreads the cost over a longer period without significant effect on the viability of the startup. (Note that the advanced version of StartBizUp will not have a fixed depreciation period).
Machinery/Equipment and Furniture