TeachMeFinance.com - explain depreciation
depreciation -- Decline in the value of a currency, financial asset,
or capital good. When applied to a capital good, depreciation usually refers
to loss of value because of obsolescence, wear, or destruction (as by fire
or flood). Book depreciation (also known as tax depreciation) is
the depreciation that the tax code allows businesses to deduct when they
calculate their taxable profits. It is typically faster than economic
depreciation, which represents the actual decline in the value of the
asset. Both measures of depreciation appear as part of the national income
and product accounts.
depreciation -- Decrease in the value of equipment from wear
and tear and the passage of time. Depreciation on business
equipment is generally deductible for tax purposes.
depreciation -- the decline in the dollar value of an asset over time and though use. The amount of annual depreciation may be computed differently for tax purposes than the actual decline in value.
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