What is depreciation? It is a method of allocating the cost of a tangible asset over its useful life. Depreciation is used in accounting to try to match the expense of an asset to the income that the asset helps the company earn. For example, if a company buys a piece of equipment for $1 million and expects it to have a useful life of 10 years, it will be depreciated over 10 years. Every accounting year, the company will expense $100,000 (assuming straight-line depreciation), which will be matched with the money that the equipment helps to make each year.
Posted on: Thu, 08 Aug 2013 05:40:52 +0000
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