Myths and Legends of Depreciation Depreciation is one of the most misunderstood accounting concepts. They are all false. The sections in italics are true. Depreciation provides funds for the eventual replacement of the asset. It is an allocation of the original cost.
Depreciation is a non-cash expense.
Depreciation records the fall in market value of the asset. This treatment of the sale of non-current assets is misleading. These are incorrect. If it needs an asset - buy it or retain it. If you return to the formulas for calculating depreciation.