depreciation charge
Noun: 1. An accounting entry: A depreciation charge is a periodic, non-cash expense recorded on a company's income statement. It represents the allocated portion of the cost of a tangible fixed asset (like machinery, vehicles, or buildings) that is considered "used up" during a specific accounting period. 2. A reduction in value: This entry systematically reduces the book value of the asset on the balance sheet and matches the cost of the asset to the revenue it helps generate over its useful life, following the matching principle of accounting.
The term is used primarily in accounting, finance, and business contexts to describe the process of expensing an asset's cost over time. * The depreciation charge for the company's new factory will be spread over 30 years. * A higher depreciation charge this quarter reduced the net profit figure. * When calculating operating income, you must account for the depreciation charge.
- On a financial statement: "The income statement shows a depreciation charge of $10,000 for the year on our delivery vehicles."
- In business analysis: "Although the company reported a loss, a significant portion of that was due to a large depreciation charge on recently acquired equipment."
- In planning: "The finance team calculated the annual depreciation charge for the new servers to be 20% of their purchase price."
- Accelerated Depreciation: Methods like the declining balance method result in a higher depreciation charge in the early years of an asset's life and a lower charge later on. This is often used for tax advantages.
- Impairment vs. Depreciation: An impairment charge is a separate, usually unexpected, write-down of an asset's value due to a sudden decline. A depreciation charge is a planned, systematic allocation of cost.
- Depreciation (n): The general concept or process of allocating an asset's cost over its useful life. (e.g., "The depreciation of the asset is calculated annually.")
- Depreciate (v): To decline in value over time; to allocate the cost of an asset as an expense. (e.g., "Most vehicles depreciate quickly.")
- Accumulated Depreciation (n): A contra-asset account on the balance sheet that totals all the depreciation charges taken on an asset since its purchase.
- Amortization charge (specifically for intangible assets)
- Write-off (in a broader, sometimes non-systematic sense)
- Expense allocation
- To take a depreciation charge: To record the depreciation expense in the accounting books.
- The company will take a depreciation charge on the machinery this quarter.
- To calculate the depreciation charge: To determine the amount of depreciation expense for a period.
- The accountant needs to calculate the depreciation charge using the straight-line method.
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an amount periodically charged to expense or against revenue in compensation for depreciation of property
