Respuesta :
When a business buys a truck, the cost is added to the asset account. As the truck brings value to the business over numerous accounting periods, that cost is gradually transferred into an expenditure account. Depreciation is the name given to this process.
An asset loses value over time as a result of use, damage from use, or obsolescence. Depreciation is the measurement for this decline. Depreciation, or the decline in value of an asset, can also result from other factors, such as unfavorable market conditions, etc.
An example of depreciation: If a firm buys a delivery truck for Rs. 100,000 and expects to use it for 5 years, the company may depreciate the asset as a depreciation charge of next five years, pay Rs. 20,000 annually.
The income statement for practically every business includes depreciation. Since it is recorded as an expense, it should be taken into consideration anytime an item is calculated for year-end tax purposes or to assess whether it is still viable for liquidation.
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