Depreciation
In accounting, depreciation means spreading the cost of a fixed asset over the periods it serves.
- Layer
- Lexicon
- Defined in
- Lexicon
- Components
- 3
Authority
This definition follows ASC 360-10-35-4.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
The lessons that teach this
Accounting, 0 to 1 — a free course taught end to end on one month of one company, with the spreadsheet exercises to work it yourself.
- 09Adjusting entriesThree entries nobody sends an invoice for, made on the last day of the month, that turn a record of transactions into a set of accounts.12 min
- 12The cash flow statementNorthwind earned $2,550 and its operations consumed $3,100. The third statement is the one that explains the difference, line by line.12 min
Depreciation, in use
Quoted from the 7 documents that use the word — what it does to an interface, in the spec's own sentence.
Templated by adjustment type — accrual, deferral, depreciation, amortization, provision, reclass, true-up. autoReverse defaults to true for accruals, with the reversal date shown inline ("Reverses 1 Oct 2026").
Sold after 26 months for $25,000: accumulated depreciation is 19,500, NBV is 28,500, and the disposal posts Dr Cash 25,000 / Dr Accumulated depreciation 19,500 / Dr Loss on disposal 3,500 / Cr Equipment 48,000.
Schedules, accruals & roll-forwards — 5. Fixed assets & depreciation
Getting this wrong — showing Accumulated depreciation 218,400 as a positive asset — is a classic and highly visible error.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- Fixed assetsEquipment and other long-lived purchases above your capitalization threshold are recorded as assets, then depreciated over their useful life.
- Cash flow statement explained: why profit isn’t cashHow the cash flow statement starts at net income, adds back non-cash costs and working capital, splits three activities and ties to the balance sheet.
- Burn rate and runway: how to calculate them correctlyGross burn, net burn and months of runway, done the way an investor checks them: from cash, averaged, and with the hires you’ve already committed to.
- Form 1120: what to give your tax preparer, and whenWhat a startup hands its tax preparer for Form 1120: closed books, a balance sheet that ties to Schedule L, book-to-tax items, ownership and 1099s.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- write-down
- amortization
Components that render this
The concept is not documentation-only. These are the components that name it in their specification, grouped and stated exactly as the catalog states them.
Components that render the terms it depends on
Little in the catalog names this concept outright, but its definition is built out of others that are named. These render fixed asset, asset.
Terms this one depends on
Also in Foundations
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
- Depreciation scheduleStraight-line, declining balance or SYD, with the convention that decides the first period.Tool
- Depreciation vs amortizationDepreciation spreads the cost of a tangible asset over its useful life; amortization does the same for an intangible asset — and, in loans and prepaids, for the paying down of a balance over time.Compare
- Journal entry for depreciationEach period, debit Depreciation expense and credit Accumulated depreciation for the period's charge. The asset account keeps its original cost; accumulated depreciation, a contra-asset, grows until net book value reaches salvage value.Entry
- Journal entry for the sale of a fixed assetWhen a fixed asset is sold, debit Cash for the proceeds and Accumulated depreciation for its balance, credit the asset for its original cost, and book the difference as a gain (credit) or a loss (debit) on sale.Entry
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.