Business Accounting and Bookkeeping
Financial Statements

How does depreciation expense differ from other operating expenses?

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May 30, 2009 6:31PM

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

useful life.

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