Why we depreciate non-current assets, the straight-line and reducing-balance methods, and disposals.
Depreciation spreads the cost of a non-current asset over its useful life (matching concept). It is a non-cash expense in the income statement; accumulated depreciation reduces the asset's carrying value in the balance sheet.
Methods
Straight-line: equal amount each year.
Reducing-balance: a fixed % of the carrying value each year (more in early years).
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