What is depreciation and its method

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Accepted Answer

Depreciation is the reduction in value of an asset over time due to wear and tear, obsolescence, or other factors.

Depreciation is a non-cash expense that reduces the value of an asset on the balance sheet.
There are several methods of calculating depreciation, including straight-line, declining balance, and sum-of-the-years'-digits.
Straight-line depreciation is the simplest method, where the asset's value is reduced by a fixed amount each year.
Declining balance depreciation is a more accelerated method, where the asset's value is reduced by a fixed percentage each year.
Sum-of-the-years'-digits depreciation is a hybrid method that takes into account the asset's useful life and the number of years it has been in use.
Depreciation is important for accurately reflecting the true value of a company's assets and for tax purposes.

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