Depreciation
Depreciation is a term we hear about frequently, but don't really understand. It's an essential component of accounting however. Depreciation is an expense that's recorded at the same time and in the same period as other accounts. Long-term operating assets that are not held for sale in the course of business are called fixed assets. Fixed assets include buildings, machinery, office equipment, vehicles, computers and other equipment. It can also include items such as shelves and cabinets. Depreciation refers to spreading out the cost of a fixed asset over the years of its useful life to a business, instead of charging the entire cost to expense in the year the asset was purchased. That way, each year that the equipment or asset is used bears a share of the total cost. As an example, cars and trucks are typically depreciated over five years. The idea is to charge a fraction of the total
cost to depreciation expense during each of the five years, rather than just the first year.
Depreciation applies only to fixed assets that you actually buy, not those you rent or lease. Depreciation is a real expense, but not necessarily a cash outlay expense in the year it's recorded. The cash outlay does actually occur when the fixed asset is acquired, but is recorded over a period of time.
Depreciation is different from other expenses. It is deducted from sales revenue to determine profit, but the depreciation expense recorded in a reporting period doesn't require any true cash outlay during that period. Depreciation expense is that portion of the total cost of a business's fixed assets that is allocated to the period to record the cost of using the assets during period. The higher the total cost of a business's fixed assets, then the higher its depreciation expense.
Terms of Use for this Private Label Article
Possibly Related PLR Articles:
How to Learn Blogging Software
A lot of blogging software is specifically designed to be
simple to use, but even the least intimidating blogging
program can feel very overwhelming to somebody who
has not spent a lot of time learning the ins and outs of
different kinds of...read more
Do You Need A Lot Of Bandwidth?
Bandwidth measures the volume of data transmitted over an internet connection. You have to know how much bandwidth you need while choosing hosting plans.
Be careful when someone claims they provide unlimited bandwidth or monthly transfer....read more
Making Money with Articles: Where to Find Affiliates For Your Niche Website
To make money with articles that you place on websites, you will also need a variety of good affiliate links that will help to generate revenue. It is important that you know where to find affiliates and that you choose the best affiliates for you...read more
Credit card debt
Credit cards are no more a luxury, they are almost a necessity. So, you would imagine a lot of people going for credit cards. In fact, a lot of people posses more than one credit cards. So, the credit card industry is growing by leaps and bounds....read more
Choosing a facial skin care product
Talking about skin care, 'facial skin care' seems to top the chart. There are loads of facial skin care products available in the market. The most common facial skin care products are the ones that are used as part of daily routine. These include...read more
Mobile Blogging is on the Cutting Edge
Mobile blogging is an exciting phenomenon that is
sweeping the blogosphere. One of the reasons why a lot
of bloggers are attracted to the medium of blogging in
the first place is that they enjoy being able to make
frequent updates and posts...read more
Civil War Bullet Collecting: A Hobby that Honors the Past
Did you know that during the Civil War, more than 1000 different types of bullets were used? This is one reason Civil War bullet collecting has become a popular hobby. Another reason is that the time of the Civil War saw changes taking place in...read more
Why Hire an International or Overseas Moving Service?
People who are planning to move overseas often face a lot of decisions. They do so because of the simple fact that moving overseas is a complicated process. When people decide to move overseas, they decide that they would be willing to face all of...read more
MENTAL ATTITUDE
Success is in the blood. There are men whom fate can never keep down they march forward in a jaunty manner, and take by divine right the best of everything that the earth affords. But their success is not attained by means of the Samuel...read more
EXCLUSIVE FRIENDSHIPS.
An excellent and gentle man of my acquaintance has said, "When fifty-one per cent of the voters believe in cooeperation as opposed to competition, the Ideal Commonwealth will cease to be a theory and become a fact."
That men should work...read more