The Ultimate Guide to Small Business Pool Depreciation in Xero
As a small business owner, you may be familiar with the concept of depreciation. However, calculating depreciation can be a daunting task, especially when it comes to pooled assets like a swimming pool. Fortunately, Xero offers a solution that can simplify the depreciation process. In this guide, we’ll walk you through everything you need to know about small business pool depreciation in Xero.
What is Small Business Pool Depreciation?
Small business pool depreciation is a method of depreciating assets that are grouped together. It’s a tax law-specific depreciation method that helps small business owners to calculate the depreciation of assets that have a similar cost and active years of use. Instead of depreciating each asset separately, you can combine multiple assets and calculate their depreciation using an average rate.
How Does Xero Depreciation Work?
Xero offers a simplified depreciation calculation for small business owners who need to depreciate multiple assets. Here’s how it works:
1. Create a Pool: In Xero, you can group assets together by creating a pool. Just select the assets you want to group and assign them to a pool.
2. Set the Pool Value: Once your assets are grouped together, you need to set a pool value. This is the cost of all the assets in the pool.
3. Choose a Rate: Xero gives you three different methods for calculating your pool’s depreciation rate: diminishing value, straight line, and diminishing value low pool. Choose the method that works best for your business.
4. Record Depreciation: Finally, Xero will automatically calculate each asset’s depreciation and record it in your books. You don’t need to do anything else.
Why Use Xero for Small Business Pool Depreciation?
Xero makes it easy to calculate depreciation for your small business. By creating a pool, you can group multiple assets that have a similar active life and calculate their depreciation using a single rate. This simplifies the process and saves you time.
Moreover, Xero offers flexible depreciation options, allowing you to choose between diminishing value, straight-line, and diminishing value low pool methods. This enables you to choose the method that’s the most suitable for your business.
How to Create a Pool in Xero?
Creating a pool in Xero is easy. Here’s how to do it:
1. Log in to your Xero account.
2. Go to the ‘Fixed Assets’ tab and select the ‘Asset Pools’ tab.
3. Click on the ‘Create a Pool’ button.
4. Choose the assets you want to group together and assign them to a pool.
5. Set the pool’s value and depreciation rate according to the method you prefer.
6. Save the pool, and Xero will start automatically calculating the depreciation for each asset in the pool.
Conclusion
Small business pool depreciation in Xero is a simple, time-saving method that simplifies the depreciation process for business owners who need to depreciate multiple assets. By creating a pool, you can group assets that have a similar active life and calculate their depreciation using a single rate. This frees up your time and gives you the peace of mind that your books are accurate. If you’re a small business owner, Xero’s pool depreciation is a tool you should consider implementing.
