Accounting
What is Depreciation?
Depreciation is the accounting process of systematically allocating the cost of a tangible fixed asset over its useful life, recognizing the expense of the asset's consumption in each accounting period.
Explanation
Depreciation methods include straight-line (equal amounts each period), declining balance (higher amounts early in the asset life), and units-of-production (based on usage). Calculating and posting depreciation is typically automated within ERP systems, but the inputs — asset cost, acquisition date, useful life, residual value — must be correctly captured at acquisition. Errors in initial asset recording propagate through years of incorrect depreciation charges. Accurate data extraction at the invoice stage, with correct classification and capitalization, ensures the depreciation calculation begins from accurate inputs.
How Rima relates
Rima's accurate invoice extraction helps ensure fixed assets are recorded correctly at acquisition — the starting point for accurate depreciation calculations.
Learn about accounting automationRelated Terms
Fixed Assets
Long-term tangible assets used in business operations, recorded on the balance sheet and depreciated over time.
General Ledger (GL)
The master record of all financial transactions in a business, organized by account.
Accrual Accounting
An accounting method that records revenue and expenses when they are earned or incurred, not when cash changes hands.
See it in action
Rima automates the manual document workflows accounting teams spend hours on every week.