Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Machine A has been completely overhauled for $9000 and is expected to last another 12 years. The $9000 was treated as an expense for tax purposes last year. It can be sold now for $30,000 net after selling expenses, but will not have salvage value 12 years hence. It was bought new 9 years ago for $54,000 and has been depreciated since then by straight-line
Both the income tax and
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