Depreciation

The idea of depreciation is quite straightforward; for instance, a forklift is an operational asset for a company's business, and each year it loses a certain amount of value until at last it is ..... and has no value for the company.

Calculating and ..... for this loss in value of such an asset is called depreciation.

Almost all companies invest in vehicles, furniture, machinery or buildings, and those that will be used for more than one year are considered ..... assets.

However, the entire cost of such an asset cannot be ..... in the year it is acquired.

If a business reduced a single year's income by the total cost of such an asset, it would result in a profit understatement in that year and a profit overstatement during the ..... years.

For assets that have a useful life of more than one year, the cost must be ..... off over at least two years.

The yearly depreciation for an asset is calculated using its ..... cost and the number of years that it will presumably retain some value.

At the end of each year, the annual depreciation is subtracted from the asset's cost; this determines its ..... value, which presumably is the same as its market value.

Straight ..... depreciation, the most common method of depreciating assets, simply divides the initial cost of an asset by the number of years that it will presumably be of use.

The ..... balance method presumes that the asset depreciates more when it is newer and less as it ages and wears.