Definition of Straight Line Depreciation

Straight line depreciation is an accounting method that allows an owner to take equal tax deductions over the useful life of the asset.

Applying "Straight Line Depreciation" to Securities Exams:

When a corporation purchases a piece of machinery for cash, the cash on the balance sheet is reduced and the equipment line on the balance is increased by and equal amount. To account for the fact that the machine will not last forever the corporation will take a non cash charge known as depreciation, this charge reduces earnings over the useful life of the machine.

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