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The purchase value of assets over their serviceable life is categorized as

  • The purchase value of assets over their serviceable life is categorized as depreciation.
  • Depreciation is the assumed reduction in the book value of an asset due to usage, the passage of time, wear and tear, technological outdating, obsolescence, or other similar factors.
  • Depreciation is simply the expense generated by the use of a fixed asset.
  • It represents the wear and tear of an asset or a reduction in its historical value due to its use.
  • At any point in time, it represents the cost of an asset less any salvage value over its estimated economic useful life.
  • Depreciation is considered to be an expense because it is matched against the revenue generated through the use of the asset.