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Depreciation: Units-of-Activity definitions

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  • Depreciation
    Allocation of an asset's cost over its useful life to match expense with revenue generated by the asset.
  • Units of Production Method
    Depreciation approach based on asset usage, such as miles driven or units produced, rather than passage of time.
  • Units of Activity Method
    Alternative name for the units of production method, focusing on output or activity level for depreciation.
  • Fixed Asset
    Long-term tangible resource, like equipment or vehicles, used in operations and subject to depreciation.
  • Useful Life
    Estimated total output or period an asset is expected to contribute to revenue generation.
  • Residual Value
    Expected worth of an asset at the end of its useful life, also called salvage or scrap value.
  • Salvage Value
    Alternative term for residual value, representing anticipated value after asset's productive use.
  • Scrap Value
    Another synonym for residual value, indicating estimated disposal value after use.
  • Depreciable Base
    Difference between asset's initial cost and its residual value, representing total amount to be depreciated.
  • Depreciation Per Unit
    Amount of depreciation assigned to each unit of output or activity, calculated using the method's formula.
  • Initial Cost
    Original purchase price or investment made to acquire a fixed asset.
  • Estimated Units of Production
    Predicted total output, such as miles or units, an asset will provide over its useful life.
  • Output
    Measure of production or activity, such as units produced or miles driven, used to allocate depreciation.