How to Determine Depreciation Rate

A small business will purchase long term assets (fixed assets) such as plant, machinery, fixtures, vehicles, and computers for use within it’s operations. With the exception of possibly land, all these long term assets have a limited life span due to wear and tear and obsolescence.

Depreciation is the name given to the expense charged to the income statement each accounting period to represent the reduction in value of these long term assets. The purpose of depreciation is to set aside an amount of profit to replace the asset in the future.

Last modified August 22nd, 2019 by Michael Brown
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