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RE: Notes On Depreciating Assets

in LeoFinance2 years ago

Something that is depreciating, i do not want to call it an asset, rather a liability.
It is same as putting money in bank, and waiting for inflation to eat it out in 50 years (avg. inflation rate is 2% per year).

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Hmm.. I somewhat remember some accounting concepts. Here I go.

Liability sounds like something you owe. The asset or the something is already purchased. It depreciates in value as the asset is used. The resale value is lower than the purchase price in a lot of cases.

Accumulated depreciation represents the asset's usage over time. The accumulated depreciation takes value away from the purchase price of an asset. Purchase price - Accumulated Depreciation = Value of Asset

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It is same as putting money in bank, and waiting for inflation to eat it out in 50 years (avg. inflation rate is 2% per year).

I'd say it is similar. Inflation would reduce the purchasing power of the currency over time. This would reduce the value of the currency. Not sure if it depreciation even though depreciation does refer to lower value over time.

if you call out definitions, yes you are right...
But a Depreciating Asset is a liability because the depreciation is a liability on you and it is eating away your asset like interest eats away your savings.

We should invest, not buy stuff that depreciates except a few items that count as necessities.. i.e. home, maybe a car if transport ain't so good...