Depreciation Expense

Depreciation is a method by which the cost of long-term fixed assets (purchases that are expected to provide benefits for the company for a period over one year) is spread over a future period (number of years) when these assets are expected to be in service and help generate revenue for a company. Depreciation quantifies the wear and tear (from use and passage of time) of the physical asset through a systematic decrease (depreciation) of the assets’ book (historical) value.

9. Depreciation

Exercise Q1: Which of the following need to be depreciated? Warehouse Administrative wages Office furniture Power plant Land used to build a supermarket

9. Depreciation

Solution Q1: Which of the following need to be depreciated? Warehouse Administrative wages [Part of SG&A, not an asset] Office furniture Power plant Land used to build a supermarket [Land is never depreciated.]