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Q. What is Depreciation?
Depreciation -- an expense which is supposed to reflect the loss in value of a fixed asset. Forinstance if a machine will entirely wear out after ten year's use, cost of the machineis charged as an expense over the ten-year life instead of all at once, when machine ispurchased. Straight line depreciation charges the same amount to expense every year.Accelerated depreciation charges more to expense in early years, less in later years.Depreciation is an accounting expense. In real life, fixed asset may grow in value or it maybecome worthless long beforedepreciation period ends.
A business may perhaps engage in thousands of transactions during a year. An accountant summarizes and classifies the data in these transactions to create useful information.
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ABC Company uses cash basis accounting for its records. During 2010, ABC collected $400,000 from its customers, made payments of $300,000 to its suppliers for inventory, and paid
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