Why and how non-current assets are depreciated, the straight-line and reducing-balance methods, and recording depreciation in the accounts.
Why depreciate?
Depreciation is the estimated loss in value of a non-current asset over its useful life, caused by wear and tear, the passage of time and obsolescence. Recording depreciation applies the matching (accruals) concept — spreading the cost of the asset over the years that benefit from it.
Depreciation is a non-cash expense: it reduces profit in the income statement and reduces the asset's carrying amount in the statement of financial position.
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