What property is depreciable?

When you purchase items used to run your business, like office supplies or telephone services, you assign them to an expense account. When you purchase a fixed asset (property used in a productive capacity which will benefit the enterprise for longer than one year), you assign it to a fixed asset account and expense it over a period of years. Most fixed assets are depreciable. Items that will be used up within one year are not.

The IRS and the Financial Accounting Standards Board both have rules about what kinds of property must be depreciated, and what kinds of property must be handled by other accounting methods. This section explains the generally accepted accounting principles that govern depreciation.