Depreciating assets are a valuable accounting tool to help with the costs of the things you absolutely need.
As everything from cars to equipment to even our office can depreciate, our clients often wonder what they should do when it comes to their spending. As depreciation can be a confusing science, we decided to break down what these assets are, as well as how you should focus your thinking around them.
What Defines A Depreciating Asset?
A depreciating asset is something that has a limited effective lifespan or anticipation of decline over time.
Some popular examples of depreciating assets include cars/transportation, technology (such as employee laptops), machinery, and office space.
While some depreciating assets can maintain their value with proper maintenance and care, almost all of them will expire. For accounting purposes, this makes it easier to write-off losses of what’s a necessary function of your business.
Depreciating Assets Are A Necessary Business Function
Depreciating assets usually include those ‘can’t live without’ items of your business. For example, buying a truck for deliveries or machinery to offer new products/services almost always will help create better revenue flows; however, these are also things that incur losses. For this reason, depreciation is useful, but don’t get too comfortable in looking at it as an easy write-off.