Depreciation and Value Concepts

The present value of all future profits received from owning a particular property.

The estimated worth of a property at the end of its useful life.

The expected period a property will be used for business or income generation.

The value of a depreciable property as shown in accounting records. It's the original cost minus all accumulated depreciation.

The decrease in the value of physical property over time due to wear, obsolescence, damage, or natural factors.

A method of depreciation where a constant amount is depreciated each year over the useful life of the asset.

The primary reason for considering depreciation in projects. Provides for the recovery of invested capital and allocates depreciation costs to the cost of production.

Methods used to calculate depreciation. Straight Line Method, Double Declining Balance Method, and Sum-of-Year Digit Method are examples.

The total amount of depreciation that has been recorded on an asset over its lifetime. It is the sum of all depreciation charges made each year.

The amount of depreciation charged to an asset for a particular year. It is typically a fixed amount when using the straight-line method.

The initial cost of an asset, including any associated costs, such as installation or shipping.

The total cost incurred to remove an asset from service and dispose of it properly.

The calculation of the book value of an asset at a specific point in time during its useful life.

A depreciation method where a fixed percentage of the book value is depreciated each year. It results in higher depreciation in the early years and lower depreciation later on.

The reduction in the value of an asset during a particular year, calculated using a specific depreciation method.

This refers to the annual depreciation rate used in the Decline Balance Method. It's typically a fixed percentage of the remaining book value.

A depreciation method that is used to calculate the depreciation expense of an asset. It's known for being less complex than other methods.

The original cost of the asset. It's the price paid to acquire the asset in the first place.

The estimated value of an asset at the end of its useful life. Represents what the asset can be sold for or its residual value.

The period of time an asset is expected to be used for its intended purpose. Think of it as the asset's working lifespan.

The percentage rate at which an asset's value decreases each year.

A method of depreciation where a constant amount is deducted from the asset's value each year over its useful life.

The depreciation value for the first year of an asset's life.

The book value of an asset at the end of the first year. It's the original cost minus the first-year depreciation.

The depreciation value for the third year of an asset's life. Calculated based on the chosen depreciation method and the book value at the beginning of the third year.