A technique used in accounting to recognize the fact that certain kinds of property (assets), such as equipment, depreciate (lose their value) over time; assets may wear out or be made obsolete by new inventions, or materials, or techniques. Depreciated property must be replaced with the same or more modern equipment, or be abandoned as items no longer needed. Money must be spent on replacement, and a variety of accounting techniques have been developed to determine how much to allow for this purpose each year for each item. Simply stated, the allowance is equal to the initial cost (or sometimes the future replacement cost) divided by the estimated life of the property. The total allowance for depreciation is shown on the balance sheet as a deduction from the initial value of the assets. This allowance may be “funded,” that is, actually set aside in a savings account from which to draw to pay for replacement, or may be “unfunded,” in which case no savings account is set up, and the organization must find the money elsewhere when it is needed. In either case, however, the depreciation entry is the same.<\/p>\n
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A technique used in accounting to recognize the fact that certain kinds of property (assets), such as equipment, depreciate (lose their value) over time; assets may wear out or be made obsolete by new inventions, or materials, or techniques. Depreciated property must be replaced with the same or more modern equipment, or be abandoned as […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-144152","post","type-post","status-publish","format-standard","hentry","category-d"],"yoast_head":"\n