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What is Depreciation?

Depreciation is how a company writes off the value of fixed assets over their useful life. It can apply to tangible assets, such as office equipment, computers, and buildings.

The amount you’ll depreciate each year can depend on the depreciation method your business uses, how much the asset costs, its useful life, and whether there’s a residual or salvage value at the end. 

Intangible assets, such as software licenses and intellectual property, are often amortized rather than depreciated, and they might not have a residual value at the end of their useful life. 

Properly recording depreciation can help ensure your books accurately represent your company’s value over time and make understanding its financial health easier.

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