What is depreciation?



What is depreciation?
Depreciation is the reduction in the value of an asset owned by a company. If a company bought a machine for $1,000 it is most likely to charge 20% depreciation on the machine as an expense and in the balance sheet the value of the $1000 would be $800 as it would be calculated after depreciation has been charged. Depreciation is the reduction in the value of the asset caused by the use and the normal wear and tear.






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