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Method to accurately value an asset in monetary terms, based on the cost of acquisition, book value and the time passed since acquisition. Having an asset properly valued helps the company to account for it and to determine a gain or loss if it is later sold.


Suppose you are interested in buying a new iPhone. You see that on Apple's website the price for the latest iPhone model is $1,200, in the other hand your friend is offering to sell you his old iPhone (which is an older generation) for just $600. This is an example of depreciation, as time passes tangible assets tend to loose value over time.

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