What Is Depreciation?

Depreciation indicates a reduction in the value of an asset over time. Typically, it occurs due to wear and tear of the asset over time as a result of continued use to calculate the depreciation of an asset, one needs to consider several factors, one of which is the useful life of the asset.

- Tarun Bhardwaj

For instance, the usable lifespan of a laptop or a smartphone might be limited to 4-5 years. For accounting and tax purposes, assets are divided into several classes, based on their useful life expectancy.

Any asset that helps in generating income or saving costs, such as property, automobiles and equipment, is subject to depreciation.

How to calculate it?