Depreciation plays a crucial role in managing the costs of assets over their useful life, allowing businesses to spread expenses and optimize financial planning. Here’s everything you need to know about depreciation:
Depreciation is a method used to recognize the decline in value of assets over time due to wear and tear or obsolescence. By claiming depreciation, businesses can deduct a portion of an asset’s cost each year on their income tax return.
Assets eligible for depreciation must meet specific criteria:
Certain assets are not eligible for depreciation deductions, including:
Depreciation is calculated annually over the useful life of the asset. Key factors in depreciation calculation include:
Accurate record-keeping is essential for depreciation:
By understanding depreciation and its implications, businesses can effectively manage asset costs, optimize tax deductions, and maintain financial transparency.
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