The
Definition Of

Depreciation

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.

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