What is the Depreciation?

Question

General knowledge

Answer 1

to the first poster: at least state where you got that answer, I know it isn't from your head

Think of it this way.  You buy a car for 10,000, in a year it is worth 7,500, the difference is the depreciation.  These are typically physical items like computers, vehicles, equipment etc.

There is amortization as well this is typically for non-tangible assets like knowledge ie patents for an invention.

In either case assets are depreciated or amortized over a certain period of time.  There are several ways of calculating as well, ie straight line, double declining.  Straight line is the easiest.  The company I work for depreciates computers over three years.  This means that after three years the company determined that it will be worth nothing at this time.  If the computer cost $900 we divide this by 36 and each month we get to write off $25 (that is we pay less taxes).

Answer 2

in simple words we can say that depreciation is the reduction in the value of an asset due to usage, passage of time, wear and tear, technological outdating or obsolescence, depletion or other such factors.