Depreciation: Definition and Types, With Calculation Examples

For example, a drill is a piece of equipment used to create holes in materials, while a forklift is used to lift and move heavy objects. Instruments, on the other hand, are used what is equipment to measure or monitor various parameters. For instance, a thermometer is an instrument used to measure temperature, while a spectrophotometer is used to analyze the concentration of a substance in a sample. New assets are typically more valuable than older ones for a number of reasons. Writing off only a portion of the cost each year, rather than all at once, also allows businesses to report higher net income in the year of purchase than they would otherwise.

In other words, pieces of equipment that are not installed at a functional location can be installed in another piece of equipment. When purchasing a building for retail operations, the historical cost could include the purchase price, transaction fees, and any improvements made to the building to bring it to use. Property, plant, and equipment (PP&E) are long-term tangible assets vital to business operations.

Why Are Assets Depreciated Over Time?

• The installation location of an object and the installed object can be represented separately in the system.
• Noncurrent assets include intangible assets, such as patents and copyrights.
• Equipment is often designed for general use and can be used in various industries or applications.
• Equipment like lawnmowers or vacuum cleaners may require regular cleaning, oiling, or blade sharpening.

PP&E is listed on a company’s balance sheet minus accumulated depreciation. PP&E represents assets that are key to the functionality of a business. Simply put, a piece of equipment is a capital investment that a company has purchased to perform a specific task for the business. This could be drill press in a machine shop or car lift in a repair shop. Some other examples include machinery, hand and power tools, and/or technical apparatus. All of these assets not considered to be a liquid assets because it is difficult long term in nature and difficult to sell or convert into cash.

For example, a screwdriver can be used in construction, automotive repair, or household tasks. Instruments, on the other hand, are often specialized for specific purposes or industries. A gas chromatograph, for instance, is used in chemistry labs to separate and analyze compounds, while a Geiger counter is used in nuclear physics to detect radiation.

Dictionary Entries Near equipment

Accumulated depreciation is a contra-asset account on a balance sheet; its natural balance is a credit that reduces the overall value of a company’s assets. Accumulated depreciation on any given asset is its cumulative depreciation up to a single point in its life. The total amount depreciated each year, which is represented as a percentage, is called the depreciation rate. For example, if a company has $100,000 in total depreciation over an asset’s expected life, and the annual depreciation is $15,000, the depreciation rate would be 15% per year. Let’s say a large corporation owns a large facility with several buildings and a large parking lot that the employees use to park their vehicles.

Video – What is Equipment?

The company is so large that they have a facilities department made up of several employees who maintain the overall facility including the parking lot. The facilities manager purchases three snow blowers for $3,000 ($1,000 each), and places them into service. He estimates the snow blowers will be used for five years and all supporting documentation for the snow blowers is provided to the accounting department. The word Equipment may refer to machinery, devices, instruments, tools, and sports gear. Things that we use to perform various activities or tasks are typically pieces of equipment. The straight-line method is the most basic way to record depreciation.

Equipment – an uncountable noun

The overall value of a company’s PP&E can range from very low to extremely high compared to its total assets. Most of the time, supplies will be multiple small-ticket items, but when they are all added up, they can account for a decent amount of money throughout the year. Since most supplies will be utilized within a year of purchase, there are termed as a current asset that can be expensed in the year they are purchased. Supplies are considered to have a finite life, which means that once they are used, their purpose has been exhausted. Equipment is typically used to carry out a specific task or function.

In the world of business, equipment refers to anything that helps us do our work, such as computers, printers, smartphones, photocopiers, modems, shredders, security systems, and vehicles. Gloves, helmets, bats, shin-pads, and balls are examples of equipment for baseball or cricket. Examples of equipment in manufacturing include lathes, drills, presses, and conveyors.

What Is Property, Plant, and Equipment (PP&E)?

Furthermore, the Greek Philosophers defined the classic five simple machines, which were used to roughly calculate the mechanical advantages. Heron of Alexandria in his study listed the five mechanisms as the lever, windlass, pulley, wedge, and screw, which were known to set a load in a motion. Flemish engineer Simon Stevin derived the mechanical advantages of the inclined plane that was merged with the simple machines.

The installation location of an object and the installed object can be represented separately in the system. The cause of damage is either updated to the functional location or piece of equipment. Equipment can be independent, individual objects, such as a tool or vehicle, or it can be an installed aggregates at a functional location, such as pumps, motors, or gears.

If you need help with determining the difference between equipment and supplies, you can post your legal need on UpCounsel’s marketplace. All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. Salvage value can be based on past history of similar assets, a professional appraisal, or a percentage estimate of the value of the asset at the end of its useful life.