Depreciation
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Depreciation
Description:
The process of deducting some portion of the cost of a property over time as an expense against income. The purpose is to reflect the fact that the property is becoming less valuable and will eventually require replacement.
Depreciation is also used in appraisals, to reflect the current value of a building and improvements.
There are a few methods for calculating depreciation. The most common method is straight line method, in which an equal amount is depreciated or deducted each year until the property or improvement has been fully depreciated.
Another method is the double declining balance method. In this method, more is deducted in the first year than with the straight line method.
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