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Depreciation expense generally begins when the asset is placed in service. Generally this involves four criteria: Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. Depreciation is technically a method of allocation, not valuation, even though it determines the value placed on the asset in the balance sheet. The business then records depreciation expense in its financial reporting as the current period's allocation of such costs. There are several standard methods of computing depreciation expense, including fixed percentage, straight line, and declining balance methods.
If an asset is expected to produce a benefit in future periods, some of these costs must be deferred rather than guy dating a lesbian as a current expense.
Any business or income producing activity using tangible assets may incur costs related to those assets.
Businesses depreciate long-term assets for both tax and accounting purposes. The former affects the balance sheet of a business or entity, and the latter affects the net income that they report.