MANAGEMENT ACCOUNTING.

Running head: MANAGEMENT ACCOUNTING
MANAGEMENT ACCOUNTING
Name of the Student
Name of the University
Author Note

MANAGEMENT ACCOUNTING1
To,
Larry Lawn,
Address
Date
Subject: Inquiry response
Dear Sir,
Depreciation can be best described as the reduction in the value of an asset throughout its
estimated useful life. In other words, it is the allocation of the cost of the asset throughout its
useful life1. The value of the asset is reduced every year keeping the wear and tear of the asset
in mind. Thus depreciation depicts the amount of usage of the asset in terms of its value.
Business firms depreciates its assets for both accounting as well as tax purposes. For instance,
a tax deduction can be taken by the companies through depreciation that is, depreciation
decreases the taxable income and the company have to pay a lesser tax amount. Here the
useful life is the estimated life span of the asset, salvage value is the estimated resale value of
the asset after the expiration of its useful life. Accumulated depreciation is the summation of
all the depreciation amounts on the particular asset till date and the value that the asset carries
on the balance sheet is the historical value of the asset deducted by the accumulated
depreciation.
1 Li, Wendy CY, and Bronwyn H. Hall. "Depreciation of business R&D capital." Review of
Income and Wealth (2018).