The term depreciation refers to an accounting method used to allocate the cost of a tangible or physical asset over its useful life. Depreciation represents how much of an asset's value has been used. It allows companies to earn revenue from the assets they own by paying for them over a certain period of time.
What is accelerated depreciation?
Depreciation ties the cost of using a tangible asset with the benefit gained over its useful life. There are many types of depreciation, including straight-line and various forms of accelerated depreciation. Accumulated depreciation refers to the sum of all depreciation recorded on an asset to a specific date.
What are the different types of depreciation?
There are many types of depreciation, including straight-line and various forms of accelerated depreciation. Accumulated depreciation refers to the sum of all depreciation recorded on an asset to a specific date. The carrying value of an asset on the balance sheet is its historical cost minus all accumulated depreciation.
How do you calculate depreciation?
This is the most common and simplest depreciation method. Formula: (Cost of asset – Scrap value of asset) / Useful life of asset = Depreciation expense Most often used for: Equipment that loses value steadily over time. Pros: It spreads the expense evenly over each accounting period.
