In the economic field, depreciation is the change in the total value of a movable or immovable property, for a set of physical reasons. Three types of depreciation can be distinguished, these being physical, functional and obsolete. In accounting, for its part, depreciation represents those expenses that a company made within the production period and that must be settled based on the income that it provided.
In the case of goods, depreciation comes with the consequences of the wear and tear of the product, the time that has passed since its production and the conditions of the materials that compose it. These factors, in combination, provide a series of characteristics that could lead to the final value of the product which, if it has been a long time, would be reduced compared to the original price. This can be seen in home sales, as the buyer visits the location and judges by the appearance of the place; Based on his conclusions, he will decide if he will buy the house or not, an event that would be influenced by the state of the house, then, you could bet on a lower price than the one set.
Meanwhile, depreciation in accounting proposes a series of formulas to find the total value of the asset that they used to generate new income, that is, how it has worn down since it began to be used. For this, there is a sum of money available so that, at the time of proving that the asset is useless, it can be replaced by this small capital. This is of vital importance, since without it the company could not continue to invest in its assets.
