27 June 2018

Depreciation

If you buy a bit of metal for £90, turn it into widgets and sell them for £270 then you have made a cash profit of £180….


But if the widget making machine cost £1,000 and lasts for ten years then the accountants knock Depreciation of 10% of the value of the machine (£100) off your profit each year, reducing the profit to £80.


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