Difference between accumulated depreciation and depreciation expense and how they are related.

Title: Difference between accumulated depreciation and depreciation expense and how they are related.
Category: Business & Economy / Management | Words: 250 | Pages: 1.1 (approximately 235 words/page)

Difference between accumulated depreciation and depreciation expense and how they are related.

Depreciation on the whole, is stated to represent the attempt to allocate an assets initial cost over its useful lifecycle. Financial managers attempt to match annual expenses of plant and equipment ownership against produced revenues. A corporation may purchase a fleet of vehicles for business use. Over a number of year, the vehicles would depreciate in value and this loss must be accounted for in the company's financial statements. In reflecting this loss, the company …showed first 75 words of 250 total…

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…showed last 75 words of 250 total…that the expense is incurred. Depreciation expense is important to record as one would not want to overvalue a company without knowing the real numbers involved. Depreciation expense is also deductable with regard to taxes and will benefit a company by being recorded in their books. Having the books correctly stating depreciation expenses could defray tax burden over substantial periods of time leaving more funds available for the company to use for maximizing shareholder wealth.

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