What is depreciation?

Question

Accepted Answer

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

Depreciation is a method used in accounting to allocate the cost of an asset over its useful life.
It represents the reduction in the value of an asset on the balance sheet.
Depreciation can be calculated using various methods such as straight-line, declining balance, or units of production.
For example, a company purchases a delivery truck for $50,000. Over the next five years, the truck's value decreases by $10,000 each year due to wear and tear. This annual decrease in value is the depreciation.
Depreciation is important for financial reporting and tax purposes as it helps in determining the true value of assets and the expenses associated with their use.

Accepted Answer

When the cost of an asset is allocated into their estimated useful life then it is called defreciation.

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