Differentiate between depreciation and capital loss
Answers
Answer: Depreciation is a reduction in the value of an asset over time, due in particular to wear and tear, whereas a capital loss is the loss incurred when a capital asset, such as an investment or real estate, decreases in value...
Depreciation means a decline in the value of productive capacity of business assets in business.Capital loss refers to loss in the value of any capital assets such as any financial investment.
Explanation:
Depreciation
Depreciation in Business or Economics means reduction in the productivity or productive value of any physical asset in the course of business.Every physical asset has a particular useful life beyond which its productive capacity starts to decline and it looses its productive value.For example,a machinery or a vehicle has a definite useful life and as these assets are used by any company or business,their productive value declines or in other words,these assets start to depreciate.
Capital Loss
In contrast,capital loss refers to the reduction in the financial value of any physical asset used in the business.Capital loss is somewhat related to depreciation in a sense that as an asset depreciates, it looses its market value or financial value as well if it is not replaced.This leads to a decline in the value of investment or business in the long run.Therefore, depreciation can lead to capital loss if assets are not periodically replaced or at least repaired.