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Depreciation is any method of allocating such net cost to those periods in which the organization is italian cupid dating to benefit from use of the asset. In accountancy, depreciation refers to two aspects of the same concept: Methods of computing depreciation, and the periods over which assets are depreciated, may vary between asset types within the same business and may vary for tax purposes.
For example, a depreciation expense of per year for five years may be recognized for an asset costing This is usually done in a rational and systematic manner.
Any business or income producing activity using tangible assets may incur costs related to those assets.
In determining the profits net income from an activity, the receipts from the activity must be reduced by appropriate costs. This expense is recognized by businesses for financial reporting and tax purposes.
The business then records depreciation expense in its financial reporting as the current period's allocation of such costs. There are several standard methods of dating depreciation expense, including fixed percentage, straight line, and declining balance methods. Generally this involves four criteria: Businesses depreciate long-term assets for both tax and accounting purposes.
If an asset is expected to produce a benefit in future periods, some of these costs must be deferred rather than treated as a current expense. These may be specified by law or accounting standards, which may vary by country.
The asset is referred to as a depreciable asset.