Depreciation Reserve Law and Legal Definition

Depreciation reserve is a business fund in which the probable replacement cost of equipment is accumulated each year over the life of the asset. It can be replaced readily when it becomes obsolete and totally depreciated. It is the total depreciation charged against all productive assets as stated on the balance sheet. Depreciation reserve is also called accumulated depreciation. The charge is made to allow realistic reduction in the value of productive assets and to allow tax-free recovery of the original investment in assets.