Depreciation of Assets

Depreciation is defined as the expensing of the cost of an asset involved in producing revenues throughout its useful life.

There are four main factors that affect the calculation of depreciation expense: asset cost, salvage value, useful life, and obsolescence.

There are various methods that can calculate depreciation expense for the period; the method used should reflect the asset's business use.

The choice of depreciation method can impact revenues on the income statement and assets on the balance sheet.