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What is depreciation?
Depreciation is the annual charge to income that results from a systematic and rational allocation of cost over the life of the fixed asset. Depreciation normally begins when an asset is purchased or completed. If it is not placed into service immediately, depreciation begins when the asset starts to lose value.
What is a fixed asset?
A tangible asset acquired, purchased, constructed, or donated for use in operations and not for investment or sale. Their useful life is longer than two years, they retain their individual identity throughout their useful life and meet the below thresholds.
Capitalization threshold for assets = $5,000 or greater. Capitalization threshold for land is $0.00