Depreciation is the process of allocating to expense the cost of a plant asset over its useful (service) life in a rational and systematic manner. It is a process of cost allocation, not a process of asset valuation.
Depreciation applies to three classes of plant assets: land improvements, buildings, and equipment. Each asset in these classes is considered to be a depreciable asset, because the usefulness to the company and revenue-producing ability of each asset will decline over the asset’s useful life.
Depreciation is an annual deduction of a part of the cost of an asset. In general, it means a decline in market value.
Depreciation this represents the loss of value from an existing stock of real capital (for an individual company or for the whole economy), reflecting the normal wear-and-tear of machinery, equipment, and infrastructure. A company or country must invest continuously just to offset depreciation, or else its capital stock will gradually run down.
Depreciation is an accounting technique by which management gradually recovers the cost of expensive fixed assets over the course of their expected lives.
Depreciation is the procedure for speeding the cost of a long-term asset over the course of its useful life.
More from this Section
- Free alongside (FAS)
Free alongside (FAS) is an international trade term in which the seller’s quoted price ...
- Credit Analysts
The credit analyst backstops the work of the loan officer by preparing detailed written ...
- Operating leases
The renting of an apartment and the rental of a car at an airport are examples of operating ...
- Affiliated person
Affiliated person is an individual who possesses enough influence and control in a corporation ...
- Accrued interest
Accrued interest applies mainly to convertible securities. Interest that has accumulated ...