For example, a depreciation expense of per year for five years may be recognized for an asset costing This expense is recognized by businesses for financial reporting and tax purposes. Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from use of the asset. The asset is referred to as a depreciable asset. In determining the profits net income from an activity, the receipts from the activity must be reduced by appropriate costs.
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