Entity: DEPRECIATION
Depreciation is the process of losing value over time, commonly seen in assets due to factors like age, wear and tear, or obsolescence. It involves spreading the cost of assets across their useful life to avoid financial loss.
DEPRECIATION
Etymology
The term 'depreciation' originates from the Latin word 'depretiare,' meaning 'to lower the price.'
Definition
Depreciation refers to the gradual decrease in the value of assets over time, often due to age, wear and tear, or obsolescence. It involves the allocation of the cost of a tangible asset over its useful life span.
Historical Context
Depreciation has been a fundamental concept in accounting and tax practices for centuries, allowing businesses to accurately reflect the value of their assets over time.
Cultural Significance
Depreciation plays a crucial role in financial reporting, helping businesses avoid significant upfront expenses and accurately represent their financial health.
Related Concepts
- Amortization
- Asset Valuation
- Capital Expenditure
See Also
The act of losing value over time, typically applied to assets due to factors like age, wear and tear, or obsolescence, with the cost of the asset being spread across its useful life.