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What Is the Chart of Depreciation?

What Is the Chart of Depreciation? thumbnail
A depreciation chart specifies cost-allocation criteria.

A company depreciates a fixed asset to recover its cost in operating activities. Department heads and segment chiefs often use depreciation charts to implement cost-recovery procedures for corporate long-term assets.

  1. Depreciation Defined

    • In accounting parlance, depreciating an asset means allocating its cost over the asset's useful life. An asset is a resource that a company owns and uses in operations. Useful life refers to the period of time over which a firm intends to use an asset in operating activities or manufacturing processes.

    Chart of Depreciation

    • In a fixed-asset accounting software package, a chart of depreciation is a list of depreciation criteria that an accountant sets, depending on legal and business requirements. These criteria may include financial reporting requirements, balance sheets for tax purposes and cost-accounting values.

    Importance

    • A chart of depreciation is an important planning tool. Central to this chart are cost-allocation criteria and guidelines, allowing a company to record accurate asset depreciation amounts and report complete financial statements at the end of each month and quarter.

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