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In determining the profits net income from an activity, the receipts from the activity must be reduced by appropriate costs. The asset is referred to as a depreciable asset. This is usually done in a rational and systematic manner.

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In accountancy, depreciation refers to two aspects of the same concept: If an asset is expected to produce a benefit in future periods, some of these costs must be deferred rather than treated as a current expense. The former affects the balance sheet of a business or entity, and the latter affects the net income that they report.

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