Definition of Depreciation:
Businesses can depreciate long-term assets for both tax and accounting purposes. For example, companies can take a tax deduction for the cost of the asset, meaning it reduces taxable income. However, the Internal Revenue Service (IRS) states that when depreciating assets, companies must spread the cost out over time. The IRS also has rules for when companies can take a deduction.
Accounting: The gradual conversion of the cost of a tangible capital asset or fixed asset into an operational expense (called depreciation expense) over the assets estimated useful life.
The objectives of computing depreciation are to (1) reflect reduction in the book value of the asset due to obsolescence or wear and tear, (2) spread a large expenditure (purchase price of the asset) proportionately over a fixed period to match revenue received from it, and (3) reduce the taxable income by charging the amount of depreciation against the companys total income. In effect, charging of depreciation means the recovery of invested capital, by gradual sale of the asset over the years during which output or services are received from it. Depreciation is computed at the end of an accounting period (usually a year), using a method best suited to the particular asset. When applied to intangible assets, the preferred term is amortization.
Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy. Depreciation represents how much of an asset's value has been used up. Depreciating assets helps companies earn revenue from an asset while expensing a portion of its cost each year the asset is in use. If not taken into account, it can greatly affect profits.
Commerce: The decline in the market value of an asset.
Economics: The decrease in the economic potential of an asset over its productive or useful life.
A reduction in the value of an asset with the passage of time, due in particular to wear and tear.
Foreign exchange: The reduction in the exchange value of a currency, either by a government or due to weakening of the underlying economy in a floating exchange rate system.
Synonyms of Depreciation
Devaluation, Devaluing, Decrease in value, Lowering in value, Reduction in value, Cheapening, Markdown, Reduction, Decline, Downturn, Downswing, Drop, Slump, Plunge, Tumble, Abatement, Ablation, Abridgment, Agio, Alleviation, Allowance, Attenuation, Attrition, Backbiting, Backstabbing, Bank discount, Belittlement, Belittling, Break, Breakage, Calumny, Cash discount, Chain discount, Charge-off, Cheapening, Comedown, Concession, Consumption, Contempt, Contraction, Curtailment, Cut, Cutting, Dampening, Damping, Debasement, Decadence, Decadency, Declension, Declination, Decline, Decrease, Decrement, Decrescence, Decrial, Deduction, Defamation, Deflation, Deformation, Degeneracy, Degenerateness, Degeneration, Degradation, Demotion, Denigration, Depletion, Depravation, Depravedness, Deprecation, Depression, Derogation, Descent, Deterioration, Detraction, Devaluation, Devolution, Diminishment, Diminution, Dip, Disapproval, Discommendation, Discount, Discrediting, Disgrace, Disparagement, Dispraise, Dissipation, Disvaluation, Dive, Downtrend, Downturn, Downward mobility, Downward trend, Drain, Drawback, Drop, Dying, Dying off, Ebb, Effeteness, Erosion, Evaporation, Exhaustion, Expenditure, Extenuation, Extraction, Fade-out, Fading, Failing, Failure, Failure of nerve, Faint praise, Fall, Falling-off, Impairment, Impoverishment, Indignity, Involution, Kickback, Knocking, Languishment, Lapse, Leakage, Lessening, Letup, Loss of tone, Lowering, Lukewarm support, Markdown, Miniaturization, Minimization, Minimizing, Misestimation, Misprision, Misprizal, Misprizing, Mitigation, Nose dive, Penalty, Penalty clause, Percentage, Plummet, Plummeting, Plunge, Premium, Price cut, Price fall, Price reduction, Price-cut, Putting down, Rebate, Rebatement, Reduction, Refund, Regression, Relaxation, Remission, Retraction, Retrenchment, Retrocession, Retrogradation, Retrogression, Ridicule, Rollback, Sag, Sagging, Salvage, Scaling down, Scandal, Setoff, Shortening, Shrinkage, Simplicity, Slander, Slash, Slighting, Slippage, Slump, Sour grapes, Subtraction, Tale, Tare, Time discount, Trade discount, Tret, Truncation, Underestimate, Underestimation, Underrating, Underreckoning, Underselling, Undervaluation, Using, Using up, Wane, Wastage, Waste, Weakening, Wearing, Wearing away, Write-off
How to use Depreciation in a sentence?
- After the housing crisis of 2008, so many homes were foreclosed upon and left vacant that a serious depreciation of the value of the individual houses occured.
- Per the matching principle of accounting, depreciation ties the cost of using a tangible asset with the benefit gained over its useful life.
- Provision should be made for depreciation of fixed assets.
- The carrying value of an asset after all depreciation has been taken is referred to as its salvage value.
- The carrying value of an asset on the balance sheet is its historical cost minus all accumulated depreciation.
- There are many types of depreciation, including straight-line and various forms of accelerated depreciation.
- Accumulated depreciation refers to the sum of all depreciation recorded on an asset to a specific date.
- What Bill did not realize was that once he had driven his expensive new Mercedes off the car dealerships lot, the initial depreciation would be at least twenty percent of the sales price of the car.
- A new vehicle for personal use or business is rewarding and enjoyable but the depreciation in value that results once driven off the car lot is frustrating.
Meaning of Depreciation & Depreciation Definition