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Depreciation For Financial Accounting
By Corinne Shabe
Depreciation in is used to spread an asset’s cost over the number of years it will be useful to the entity. It is used to reflect the decreasing value of the asset over time due to wear-and-tear, usage, technological outdating, etc… The original purchase affects the entity’s cash account one time. For the remaining useful life of the item, the assets are affected on the balance sheet as accumulated depreciation and the expenses are affected
on the income statement as depreciation expenses. Depreciation is a way to spread the expense of an asset over the span of its useful life, as long as that span is longer than one period. Many different types of assets are depreciable including tangible assets (buildings, equipment, machinery) and intangible assets (software, patents, copyrights). There are several types of depreciation methods used in bookkeeping today. A few are outlined below.
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