Depreciation: Is a non-cash expense shown

Depreciation is a non-cash expense shown in the profit and loss account. It reduces the net profit but does not involve actual cash outflow, ensuring correct periodic matching of asset expense and revenue. Learn what depreciation is, why companies depreciate, and how to calculate it using different methods. See examples of depreciation for fixed assets such as machinery, tools, and equipment. Depreciation is a planned, gradual reduction in the recorded value of an asset over its useful life by charging it to expense, usually over multiple years. Understanding the different depreciation techniques allows firms to distribute an asset’s cost appropriately throughout its useful life. This article delves into different types of depreciation methods, studying their formulae and presenting practical examples to help with understanding.