Depreciation

The value of the Assets of a Company is depreciated over their productive life. Depreciation is a non-cash expense. Thus, the depreciation schedule will reduce taxable income.

Depreciation is an accounting charge which is used to decrease the value or depreciate the value of a productive asset. For example, a computer purchased FY0 will have its value depreciated over a period of time to zero in FYX. In accounting terms, this indicates an end to its value to the company, or obsolescence. Depreciation is a non-cash charge and an adjustment is made in the Cash Flow Statement to reflect the non-movement in Cash Flow over the FY.