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Depreciation
       
 
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Depreciation

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Depreciation
In accounting, an Expense recorded to allocate a Tangible asset's cost over its useful life or a decrease in the value of a particular Currency relative to other currencies.
    
Because depreciation is a non-Cash Expense, it increases free Cash flow while decreasing reported Earnings. Depreciation is a term used in accounting, Economics and finance with reference to the fact that assets with finite lives lose value over time. In simple words we can say that depreciation is the reduction in the value of an asset due to usage, passage of time, wear and tear, technological outdation  or obsolation, depletion or other such factors.
    
Depreciation is used in accounting to try to match the Expense of an asset to the income that the asset helps the company earn. For example, if a company buys a piece of equipment for $1 million and expects it to have a useful life of 10 years, it Will be depreciated over 10 years. Every accounting year, the company Will Expense $100,000 (assuming straight-line depreciation), which Will be matched with the money that the equipment helps to make each year.
    
Examples of Currency depreciation are the infamous Russian ruble crisis in 1998, which saw the ruble lose 25% of its value in one day.
Posted by  Institute for International Research
 
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