Hello Rina,
The real question should be when do you expense or capitalize a business item. Depreciation is another item altogether.
First, we expense an item in business with an expired cost, i.e., your cost has no future value. For example, your cellular phone bill is an expense because next month, you must pay another bill for the service. On the other hand, you capitalize or place items that have future value on the balance sheet—for example, your cellular phone. Your phone can be used today, tomorrow, next month, and next year.
Conversely, depreciation is a way of spreading the cost of an asset (the cellular phone about) over an estimated useful life. Only assets used in a business to generate income can be depreciated.
I hope that was helpful.
Sincerest Regards,
Joe D.
