{"id":39461,"date":"2023-10-23T08:00:00","date_gmt":"2023-10-23T05:00:00","guid":{"rendered":"https:\/\/www.simplbooks.fi\/?p=39461"},"modified":"2025-09-19T14:02:50","modified_gmt":"2025-09-19T11:02:50","slug":"depreciation-of-buildings-in-accounting","status":"publish","type":"post","link":"https:\/\/www.simplbooks.fi\/en\/blog\/depreciation-of-buildings-in-accounting\/","title":{"rendered":"Depreciation of building in accounting"},"content":{"rendered":"\r\n
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Depreciation of a building in accounting follows the same principles as the depreciation of machinery or equipment. It can be done once a year during the preparation of financial statements, or, if preferred, on a monthly basis. In simple terms, depreciation is done by calculating the depreciation amount based on the building\u2019s residual value<\/a> and making the necessary accounting entry.<\/p>\r\n

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Depreciable vs. non-depreciable fixed assets<\/span><\/h2>\r\n\r\n\r\n\r\n\r\n\r\n

Fixed assets are assets acquired for use in a company’s operations and are not intended for resale. For tax purposes, fixed assets are divided into depreciable and non-depreciable categories.<\/p>\r\n

As the name suggests, non-depreciable fixed assets do not lose value through use. Therefore, depreciation is generally not applied to non-depreciable assets. Instead, their acquisition cost (the value at which the asset was purchased) is deducted only when the asset is sold or otherwise disposed of. Typical examples of non-depreciable assets include land, shares, securities, and artworks.<\/p>\r\n

Depreciable fixed assets, on the other hand, are used in the company’s operations and lose value over time. For tangible depreciable assets such as machinery and equipment, a maximum depreciation rate of 25% can be applied (or increased depreciation for the years 2020\u20132025). Building depreciation, however, follows its own rules.<\/p>\r\n\r\n\r\n\r\n

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Buildings in accounting<\/span><\/h2>\r\n\r\n\r\n\r\n\r\n\r\n

Depreciation of buildings differs from that of other assets, such as machinery or equipment, because building depreciation must be calculated separately for each individual building. In contrast, machinery and equipment can be depreciated collectively based on their total residual value.<\/p>\r\n

If a company owns multiple buildings, it is practical to record them in the balance sheet so that they can be easily reviewed individually. This can be done by creating a separate account for each building or by grouping buildings with the same depreciation rate under a single account (e.g., “Buildings 4%”). If multiple buildings are recorded under one account, the depreciation for each building must still be tracked separately, for example, using an Excel spreadsheet.<\/p>\r\n

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Depreciation rates for buildings<\/span><\/h2>\r\n\r\n\r\n\r\n\r\n\r\n

Buildings and structures do not have a uniform depreciation rate; the applicable rate depends on the purpose of the building. The maximum annual depreciation rates are as follows:<\/p>\r\n\r\n\r\n\r\n