Depreciation in Accounting

What is Depreciation in Accounting?

Depreciation in accounting refers to the systematic allocation of the cost of a tangible asset over its useful life. This allocation is done to reflect the gradual wear and tear, obsolescence or loss of value of the asset over time.

Depreciation is recorded as an expense in the company’s income statement, which reduces the reported net income for the period. The accumulated depreciation is recorded in the balance sheet as a contra-asset account, which is subtracted from the original cost of the asset to arrive at its net book value.

What are the 3 types of depreciation?

1) Straight-line depreciation

2) Accelerated depreciation

3) Units of production depreciation

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