Depreciation
Reduction in asset value over time due to use, wear, age, obsolescence.
Formula
Net Book Value = Original Cost − Accumulated Depreciation
Real World
Apple's MacBook production machinery loses value each year as it wears out and newer technology makes it obsolete, reducing the asset's value on the balance sheet annually.
Exam Focus
Distinguish straight-line from reducing balance methods; 'calculate' questions require showing the formula and workings clearly.
How well did you know this?