How does depreciation expense differ from other operating expenses?
Operating Expenses are the cost of doing business and are paid
out of the company's cash or in some cases paid with Bonds, Stocks,
or Dividends, either way, these expense will affect the Cash of the
company and it's worth.
Their are two accounts for Depreciation one is Accumulated
Depreciation. This is an Contra-Asset Account and is listed on the
Balance Sheet under assets and is deducted from the related asset
Depreciation Expense is the expense we claim from Accumulated
Depreciation and though it is an expense it does not affect our
Cash. We do not actually "pay" this expense. Depreciation is the
decline in usefulness of a Fixed Asset.
Remember, all Fixed Assets (except Land) lose their usefulness.
Decreases in the usefulness of assets that are used in generating
revenue are recorded as expenses. However, such decreases for fixed
assets are difficult to measure. For this reason, a portion of the
cost of the fixed asset is recorded as an expense each year for its