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	~~'''Depreciation''' is a term used~~ in accounting~~, economics~~ and finance~~, referring to the decrease in value of an asset over time. This decrease can be due to a variety of factors, such as wear and tear, obsolescence, or economic conditions.~~		{{short description\|Concept in accounting and finance}}
			{{other uses\|Depreciation (disambiguation)}}

	== ~~Accounting Depreciation~~ ==		==Overview==
			[[File:Depreciation car.svg\|thumb\|right\|Illustration of car depreciation over time]]
			'''Depreciation''' is an accounting method of allocating the cost of a tangible asset over its useful life. Businesses use depreciation to account for declines in value over time, which can be due to wear and tear, age, or obsolescence. Depreciation affects the balance sheet, income statement, and tax calculations.

	In [[accounting]], depreciation is a method used to allocate the cost of a tangible asset over its useful life. The depreciation expense is recognized in the income statement and reduces the book value of ~~the asset in the balance sheet.~~ There are several methods of depreciation, ~~including straight-line, declining balance,~~ and ~~units of production~~.		==Methods of Depreciation==
			There are several methods of calculating depreciation, each with its own implications for financial reporting and tax purposes.

	== ~~Economic~~ Depreciation ==		===Straight-Line Depreciation===
			The [[straight-line depreciation]] method spreads the cost of an asset evenly over its useful life. It is the simplest and most commonly used method. The formula is:

	In [~~[economics~~]], depreciation refers to the decrease in the market value of an asset over time. This can be due to factors such as wear and tear, obsolescence, or changes in market demand. Economic depreciation is often used in the calculation of national income and wealth.		: \[ \text{Depreciation Expense} = \frac{\text{Cost of Asset} - \text{Salvage Value}}{\text{Useful Life}} \]

	== ~~Financial Depreciation~~ ==		===Declining Balance Method===
			The [[declining balance method]] accelerates depreciation, allowing for higher expenses in the earlier years of an asset's life. This method is often used for assets that quickly lose value.

	In [[~~finance~~]], depreciation ~~is a non-cash expense that reduces~~ the ~~value~~ of an asset ~~as a result of physical deterioration~~ or ~~obsolescence. Depreciation~~ is ~~often used in financial modeling~~ to ~~estimate the future cash flows of an asset~~.		===Units of Production Method===
			The [[units of production method]] bases depreciation on the actual usage of the asset. This method is suitable for machinery or vehicles where wear and tear is directly related to usage.

	== ~~Depreciation Methods~~ ==		==Impact on Financial Statements==
			Depreciation affects both the [[balance sheet]] and the [[income statement]]. On the balance sheet, it reduces the book value of assets. On the income statement, it is recorded as an expense, reducing net income.

	~~There are several methods of calculating depreciation, including:~~		==Tax Implications==
			Depreciation can have significant tax implications. Businesses can deduct depreciation expenses from their taxable income, reducing their tax liability. Different jurisdictions have specific rules and rates for tax depreciation.
	* '''Straight-Line Depreciation~~''': This is the simplest and most commonly used method~~. ~~It involves dividing the initial cost of the asset by its estimated useful life.~~

	* '''Declining Balance Depreciation''': This method accelerates the depreciation ~~expense over the life of the asset~~. ~~It involves applying a higher depreciation rate in the early years of the asset's life~~ and ~~a lower rate in the later years.~~

	* '''Units of Production Depreciation''': This method ties the depreciation ~~expense to the actual usage of the asset. It involves dividing the initial cost of the asset by its estimated total production capacity~~.

	~~== See Also ==~~

			==Related Concepts==
	* [[Amortization]]		* [[Amortization]]
	* [[Capital ~~Expenditure~~]]		* [[Asset management]]
	* [[Fixed ~~Asset~~]]		* [[Capital expenditure]]
			* [[Fixed asset]]
	* [[Impairment]]		* [[Impairment]]

	== ~~References~~ ==		==Related pages==
			* [[Accounting]]
	~~<references />~~		* [[Finance]]
			* [[Taxation]]
	~~{{stub}}~~

	[[Category:Accounting]]		[[Category:Accounting]]
	~~[[Category:Economics]]~~
	[[Category:Finance]]		[[Category:Finance]]

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'''Depreciation''' is a term used in accounting, economics and finance, referring to the decrease in value of an asset over time. This decrease can be due to a variety of factors, such as wear and tear, obsolescence, or economic conditions.

== Accounting Depreciation ==

In [[accounting]], depreciation is a method used to allocate the cost of a tangible asset over its useful life. The depreciation expense is recognized in the income statement and reduces the book value of the asset in the balance sheet. There are several methods of depreciation, including straight-line, declining balance, and units of production.

== Economic Depreciation ==

In [[economics]], depreciation refers to the decrease in the market value of an asset over time. This can be due to factors such as wear and tear, obsolescence, or changes in market demand. Economic depreciation is often used in the calculation of national income and wealth.

== Financial Depreciation ==

In [[finance]], depreciation is a non-cash expense that reduces the value of an asset as a result of physical deterioration or obsolescence. Depreciation is often used in financial modeling to estimate the future cash flows of an asset.

== Depreciation Methods ==

There are several methods of calculating depreciation, including:

* '''Straight-Line Depreciation''': This is the simplest and most commonly used method. It involves dividing the initial cost of the asset by its estimated useful life.

* '''Declining Balance Depreciation''': This method accelerates the depreciation expense over the life of the asset. It involves applying a higher depreciation rate in the early years of the asset's life and a lower rate in the later years.

* '''Units of Production Depreciation''': This method ties the depreciation expense to the actual usage of the asset. It involves dividing the initial cost of the asset by its estimated total production capacity.

== See Also ==

* [[Amortization]]
* [[Capital Expenditure]]
* [[Fixed Asset]]
* [[Impairment]]

== References ==

<references />

{{stub}}

[[Category:Accounting]]
[[Category:Economics]]
[[Category:Finance]]

Depreciation - Revision history

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