Depreciation is defined as an
accounting methodology which allows an organization to spread the cost of a
fixed asset over the expected useful life of that asset.
accounting methodology which allows an organization to spread the cost of a
fixed asset over the expected useful life of that asset.
The cost of the fixed asset
immediately comes out of the cash account of the organization and is entered as
an asset for that organization. A fixed asset is considered depreciable if it
will wear out or become obsolete over a period of years. The period of years is
called the LIFE or the useful life of an item.
immediately comes out of the cash account of the organization and is entered as
an asset for that organization. A fixed asset is considered depreciable if it
will wear out or become obsolete over a period of years. The period of years is
called the LIFE or the useful life of an item.
Depreciation items include,
buildings, manufacturing equipments, office equipment and vehicle.
buildings, manufacturing equipments, office equipment and vehicle.
Land is not considered a depreciable
item as it does not wear out or become obsolete.
item as it does not wear out or become obsolete.
Some fixed assets may be expected to
have a market value at the end of their useful life, this expected value is
called the salvage value.
have a market value at the end of their useful life, this expected value is
called the salvage value.
