What is depreciation? Define useful life, residual value, and depreciable cost.

The depreciation is the allocation of the cost of plant assets to expense over the useful life of the asset. The depreciation matches the expense against the revenue from using the asset to measure net income

Useful life: The useful life is defined as the time that how the company expects it will use the certain asset in the business. The estimated useful life of the asset can be expressed in time, such as months, years, usage, or the number of units produced.

Residual Value: The estimated residual value or salvage value is defined as the expected value of the asset at the of its useful life. At this price companies sell the asset, which is also known as scrap value.

Depreciable cost: The asset is purchased at a cost. The cost of the asset minus the residual life of the asset is known as the depreciable cost of the asset owned by the company.