Category: Finance & Accounting

What is depreciation, types of depreciation?

Depreciation is basically the decrease in value of an asset over time due to wear and tear, age, or obsolescence. It's an important concept in accounting and finance, used to account for the gradual loss of value of assets. There are several types of depreciation, including straight-line, declining balance, and sum-of-the-years' digits. Straight-line is the simplest and most commonly used method, where the cost of the asset is divided over its useful life. Declining balance and sum-of-the-years' digits are more complex but can provide a more accurate reflection of an asset's value over time.