Depreciation is the term used for the expiration or using up of a capital （also known as longlived, fixed or plant） asset （ for example, equipment and buildings）. It is the allocation of the cost of a plant asset to expense over its useful life. The following points define depreciation: Depreciation is similar to the expiration or using up of a prepayment, except the a-mount of depreciation in each accounting period is based on subjective estimates, in other words,judgment in terms of estimating the asset' s useful life and estimating its salvage or trade-in value. Depreciation is an estimate of the decline in usefulness, not necessarily a decline invalue. Depreciation is a method of cost allocation, not asset valuation. A capital asset whosemarket value is increasing would still be amortized （except for those capital assets, such asland, that are not amortized）. While the asset generates revenues, it gradually wears out. Tomatch the expense of the asset to the revenues it is generating, the cost of the asset must bespread over its useful life as an expense. The amount of the asset used in a period is determined by allocating the net amortizablecost of the asset （original cost less expected trade.in allowance） over the expected useful life ofthe asset. ……
