Investment Term For The Day - Wasting Asset
Sep 20, 2021 ·
2m 26s
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Description
A wasting asset is an item that has a limited life span and irreversibly declines in value over time. Examples include depreciating fixed assets such as vehicles and machinery and...
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A wasting asset is an item that has a limited life span and irreversibly declines in value over time. Examples include depreciating fixed assets such as vehicles and machinery and securities with time decay such as options, which continually lose time value after purchase.
Any asset that decreases in value over time is a wasting asset. For example, a truck used for business purposes will decrease in value over time. Accountants attempt to quantify the decrease by assigning a depreciation schedule to recognize the falling value each year.
While most vehicles and machines are wasting assets, there are a few exceptions. A rare car, for instance, may actually become more valuable over time. The value often declines initially, yet over a long period of time, the car becomes more valuable again if it is well maintained. Generally, though, vehicles are wasting assets with their value gradually declining until they are only worth scrap metal/parts.
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Any asset that decreases in value over time is a wasting asset. For example, a truck used for business purposes will decrease in value over time. Accountants attempt to quantify the decrease by assigning a depreciation schedule to recognize the falling value each year.
While most vehicles and machines are wasting assets, there are a few exceptions. A rare car, for instance, may actually become more valuable over time. The value often declines initially, yet over a long period of time, the car becomes more valuable again if it is well maintained. Generally, though, vehicles are wasting assets with their value gradually declining until they are only worth scrap metal/parts.
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