Depreciation is how a company writes off the value of fixed assets over their useful life. It can apply to tangible assets, such as office equipment, computers, and buildings.
Depreciation is an accounting method used by small business owners to allocate the cost of tangible assets, such as vehicles, equipment, or buildings, over their useful lives. It represents the gradual decrease in the value of these assets due to wear and tear, obsolescence, or usage. By recognizing depreciation expenses, small business owners can accurately reflect the declining value of their assets on their financial statements. Depreciation is important for determining the true profitability of a business and for tax purposes, as it allows for tax deductions on the depreciated value of assets. Effective management of depreciation can help small business owners make informed financial decisions and ensure the long-term sustainability of their operations.