Depreciation of fixed assets in the context of accounting and tax law in Poland

Depreciation of fixed assets is an important source of internal financing, used in practice by entrepreneurs. In addition to net income, depreciation is the second internal source of funding for creating a budget surplus in the enterprise. Depreciation, while measuring the degree of reduction in the initial value of fixed assets, informs about the extent of its consumption and is an important prerequisite for investment decisions. Choice of optimal method of depreciation is associated with the risk of economic activity in conditions of uncertainty and turbulence, related to the behaviour of the market in the future, and also requires knowledge of the complicated changes of law, regulations, interpretations or judgments. The aim of this paper is to present the essence of depreciation, identification and characterisation of discrepancies in the calculation of consumption of fixed assets, which are consequences of compliance with the regulation in the Accounting Act and the Legal Persons Income Tax Act. What is more, methods of depreciation of fixed assets are discussed, since an entrepreneur ought to consider what the most favourable distribution of the costs of depreciation over time is. Furthermore, issues of methods and depreciation rates are described, conducting simulations of depreciation methods. Review of literature and existing legislation is the research methodology in this paper. Reliable knowledge gathered in this article can be useful in everyday accountant work, but may also be used e.g. in the classroom teaching.