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Depreciation

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Can you please explain the concept of depreciation? can you please show examples. can you tell me how does straight line depreciation differ from MACRs Depreciation? Thank you very much this will help me to understand the information and help me study for my test.

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Solution Summary

The solution explains in details the different concepts of depreciation. It talks about the different methods of depreciation and explains with examples.

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Depreciation is a term used in accounting, economics and finance with reference to the fact that assets with finite lives lose value over time. Depreciation is an example of applying the matching principle as per generally accepted accounting principles. Depreciation, when used as a technical accounting term, is the allocation of the historical cost of an asset across time periods when the asset is employed to generate revenues. This process of cost allocation has little relationship to the market value or current selling price of the asset, it is simply the recognition that a portion of the asset's cost--the portion that will never be recuperated through re-sale or disposal of the asset--was "used up" in the generation of revenues for that time period.

Straight Line Depreciation:

Straight-line depreciation is the simplest and most often used technique, in which the company estimates the "salvage value" of the asset after the length of time over which it will be used to generate revenues (useful ...

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