2007-12-11 15:35:42 · 5 answers · asked by Anonymous in Business & Finance ➔ Investing
No, depreciation simply reflexes the decreased value of your asset. I doesn't involve cash at all.
Say you have a fleet of delivery trucks that were new the day you started business. Each year you would have expenses that cost money like fuel, drivers and maintenance but you would know you were wearing out your fleet. So besides the cash expenses you would make a journal entry to credit accumulated deprecation and debit depreciation expense. This would reduce your profit or increase your loss for tax purposes. After you have used up the fleet there wouldn't be a fund of money sitting waiting for you to buy a new fleet.
2007-12-11 15:38:35 · answer #1 · answered by shipwreck 7 · 1⤊ 0⤋
We all agree that depreciation is not a fund, it's a way of gaining some advantage of a tangible asset that loses value.
The irony of depreciation is that not all assets lose value.
I have two worthless cars that I drive, maintain and trust my life to.
Their value is possibly a few thousand bucks on the market, but realistically, outclass and actually do better than most newer type cars.
A home, for the longest time, was a depreciating asset that actually gained in value, until recently.
In sum, anything that can be touched is subject to depreciation.
However, certain inherently valuable items like gold, jewelry or art usually increases in value due to it's desirability and scarcity.
2007-12-12 04:14:30 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Depreciation provides nothing except a little tax break.
Nearly all assets lose value over time. The computer you are typing on is not worth what you paid for it.
Depreciation allocates the loss of value over time so that your balance sheet better reflects the value of the assets.
2007-12-11 23:40:57 · answer #3 · answered by Gem 7 · 0⤊ 0⤋
No. Depreciation is a reduction of the usefulness of an asset.
2007-12-11 23:44:25 · answer #4 · answered by R 4 · 0⤊ 0⤋
Not even slightly!!!
You first lay out the cash for the asset - but instead of expensing it, (as you would with other things utilities, supplies, etc.), you have to expense it off in future periods over it's useful life.
There is no cash involved in the future depreciation (you spent that up front)
2007-12-11 23:42:22 · answer #5 · answered by Springtime of my Loving 2 · 0⤊ 1⤋