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Depreciation
Buildings, machinery, equipment, furniture, fixtures,
computers, outdoor lighting, parking lots, cars, and trucks are examples
of assets that will last for more than one year, but will not last
indefinitely. During each accounting period (year, quarter, month, etc.)
a portion of the cost of these assets is being used up. The portion
being used up is reported as Depreciation Expense on the income
statement. In effect depreciation is the transfer of a portion of the
asset's cost from the balance sheet to the income statement during each
year of the asset's life.
The
concept of depreciation is really pretty simple. For example, lets
say you purchase a truck for your business. The truck loses value the
minute you drive it out of the dealership.
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Accounting for Fixed Assets
2005 U.S. Master Depreciation Guide
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