The automobile we drive and the house we live in are both depreciable assets. A depreciable asset is one that depreciates in value over time. Isn't it incredible? Depreciation is defined as the systematic reduction of the recorded cost of a fixed asset until the asset's value is zero or inconsequential in accounting terms. Buildings, furniture, office equipment, machinery, and other fixed assets are examples. The only exception is land, which cannot be depreciated because its value increases with time. Depreciation allows you to apply a percentage of the cost of a fixed asset to the revenue it generates. Revenues are recorded with their corresponding expenses in the accounting period when the asset is in use, hence this is required by the matching principle. This aids in obtaining a comprehensive view of revenue generating. There are three methods to calculate depreciation in a small business. They are- Straight line method, Unit of production method and Double declining balance method.

S Sai Hrishikesh

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