What does depreciation expense mean

Answers:
It is assumed that long lived tangible assets reduce in value over time. This reduction in value is hard to quantify economically, but is an acceptable reduction in income when calculating income tax. This reduction in value due to use or age of a long lived asset is called depreciation. The reduction or offset against income is called depreciation expense. Usually this is not an expense that requires the immediate expenditure of cash, but is called a non-cash expense deducted from income before calculating income tax. Generally the depreciation expense amounts are calculated from formulas promulgated by tax regulators to either model actual economic depreciation, or to motivate certain economic behaviors by allowing favorable tax treatment for the favored activities.
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Relevant answers:
  • What is depreciation expense?
    normal balance of debit
  • Why depreciation expenses is referred to as a noncash expenses?
    Because we are not incurring any cash when we are providing depreciation on fixed assets. Depreciation results in the reduction of fixed assets but doesn't involve any cash outflow. That is the...
  • Is Depreciation expense a non cash expense?
    Correct. When a long-term tangible asset is purchased (e.g., property, plants and equipment), the Matching Principle under GAAP requires expenses to be systematically matched with the periods in...
  • Depreciation expense of building is a administrative expense or a selling expense?
    selling expense
  • Is depreciation is an operating expense?
    Yes; depreciation is considered to be an operating expense.

    • Can you answer these questions?