CAPITAL REPLACEMENT Definition

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CAPITAL REPLACEMENT, or economic depreciation, is the portion of the value of machinery and equipment, in addition to repairs, that is used up in the production of a particular commodity. It is based on the current value of the machinery. Capital replacement may be regarded as a discretionary expense in any particular year. It may be deferred when income is low but ultimately must be paid to maintain the capital stock so that over the long term, the operation remains in business.

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TIME SERIES is an ordered sequence of values of a variable at equally spaced time intervals.

ACCOUNTING PERIOD is the time period for which accounts are prepared, usually one year.

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