Depreciated Cost
Depreciated Cost refers to the remaining value of a fixed asset after accounting for depreciation due to wear and tear, aging, or technological obsolescence. Depreciated cost is determined by subtracting the accumulated depreciation from the original cost of the asset. It represents the current book value of the asset during the accounting period, rather than its original purchase cost.
Definition: Depreciation cost refers to the remaining value of fixed assets after their value has decreased due to wear and tear, aging, or technological obsolescence during use. Depreciation cost is determined by calculating the original cost of the asset minus the accumulated depreciation. It reflects the current book value of the asset during the accounting period, rather than its initial purchase cost.
Origin: The concept of depreciation cost originated in accounting and can be traced back to the 19th century during the Industrial Revolution. At that time, companies began to use machinery extensively, and it became important to reasonably allocate the cost of these machines. With the development of accounting theory, depreciation cost gradually became an important part of corporate financial statements.
Categories and Characteristics: Depreciation cost is mainly divided into three types: straight-line depreciation, accelerated depreciation, and units of production depreciation.
- Straight-line depreciation: The annual depreciation amount is the same, suitable for assets with stable value.
- Accelerated depreciation: The depreciation amount is larger in the early years and gradually decreases, suitable for assets with rapid technological updates.
- Units of production depreciation: Depreciation is calculated based on actual usage, suitable for assets with uneven usage frequency.
Specific Cases:
- A manufacturing company purchases a machine worth 1 million yuan, with an expected lifespan of 10 years and a residual value of 100,000 yuan. Using the straight-line depreciation method, the annual depreciation expense is (1,000,000-100,000)/10=90,000 yuan.
- A technology company purchases a server worth 500,000 yuan, with an expected lifespan of 5 years and a residual value of 50,000 yuan. Using the accelerated depreciation method, the first year's depreciation expense is (500,000-50,000)*40%=180,000 yuan, and the second year's is (500,000-180,000-50,000)*40%=102,000 yuan.
Common Questions:
- Does depreciation cost affect cash flow? Depreciation cost is a non-cash expense and does not directly affect the company's cash flow.
- How to choose a depreciation method? The choice of depreciation method should be based on the usage of the asset and the company's financial strategy.
