Retirement Method of Depreciation


DEFINITION of 'Retirement Method of Depreciation '

An accounting procedure in which an asset is expensed for depreciation purposes only when it is removed from service instead of allocating its costs across the useful life of the asset. The depreciation expense must be reduced by the asset's salvage value, if any. Public utilities and railroads are the main types of businesses that might use this type of depreciation.

BREAKING DOWN 'Retirement Method of Depreciation '

The purpose of the retirement method of depreciation is to simplify accounting and recordkeeping for companies that own many similar assets that individually are low in value but together represent a significant expense. An electric company might use the retirement method of depreciation to account for the electric meters that are installed on the sides of residents' homes, for example.

  1. Appraisal Method Of Depreciation

    A form of depreciation calculation that is based upon appraisal ...
  2. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
  3. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax ...
  4. Straight Line Basis

    A method of computing amortization (depreciation) by dividing ...
  5. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  6. Group Depreciation

    A method of calculating depreciation by amalgamating assets into ...
Related Articles
  1. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  2. Forex Education

    Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".
  3. Insurance

    What's The Difference Between Medicare And Medicaid?

    One program is for the poor; the other is for the elderly. Learn which is which.
  4. Savings

    How To Set Up A Trust Fund If You're Not Rich

    You don't need to be worth millions to create your own trust fund. Learn how your money can be handled in the event of your death.
  5. Retirement

    Top Signs You Aren’t Ready to Retire Yet

    Think you are prepared to retire? These warning signs may indicate otherwise.
  6. Markets

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  7. Retirement

    457 Plans and 403(b) Plans: A Comparison

    There's plenty of advice about 401(k) plans, but what about 457 and 403(b) plans?
  8. Investing Basics

    How To Efficiently Read An Annual Report

    Annual reports are clearly prepared without any intent to deceive or mislead investors. Still, investors should read them with a dose of skepticism.
  9. Investing Basics

    Explaining Financial Statement Analysis

    Financial statement analysis is the process of reviewing a company’s statements to gain an understanding of its financial health.
  10. Investing Basics

    How Financial Statements Are Manipulated

    Financial statement manipulation is an ongoing problem, and investors who buy stocks or bonds should be aware of its signs and implications.
  1. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ... Read Full Answer >>
  2. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  3. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  4. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  5. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  6. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  2. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  3. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  4. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  5. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the ...
Trading Center