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Depreciation


Definition of "Depreciation"

Jim Peters
  Jim R. Peters Real Estate- Windermere Homes and Estates

(1) Decrease in the value of property because of use, obsolescence, deterioration, wear and tear, or the passing of time. (2) Spreading out of the original cost over the estimated life of the fixed assets such as plant and equipment. Depreciation reduces taxable income. Among the most commonly used depreciation methods are the straight-line depreciation and accelerated depreciation, such as the sum-of-the-years-digits and double-declining balance methods. (3) Decline in economic potential of limited life assets originating from wear and tear, natural deterioration through interaction of the elements, and technical obsolescence. To some extent, maintenance may partially arrest or offset wear and deterioration.



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