According to AccountingCoach, “Buildings, machinery, equipment, furniture, fixtures, computers, outdoor lighting, parking lots, cars, and trucks are examples of assets that will last for more than one year, but will not last indefinitely. During each accounting period (year, quarter, month, etc.) a portion of the cost of these assets is being used up. The portion being used up is reported as Depreciation Expense on the income statement.” But there is one exception. It is land which is assumed that can be used forever, so it will not be depreciated.

The depreciation methods can be divided into two: straight-line depreciation and accelerated depreciation. The straight-line method uses the formulea that refers to costs minus the scrap value of that asset over the useful life of the asset. This method gives same depreciation expense  every year until “the value is listed as $0 on the books”(James Collins,eHow Contributer). Compared to straight-line method, accelerated method provides the companies with more depreciation in the previous years but less in the later years; therefore, the accelerated method is very attractive to  companies for income tax returns due to the immediate income tax savings in the early years. There can be many different types of accelerated methods that depend on the declining percentage.

(Source provided by

James Collins,eHow Contributer, http://www.ehow.com/info_7759900_depreciation-occur.htm

AccountingCoach,http://www.accountingcoach.com/online-accounting-course/11Xpg02.html )