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Simple English definitions for legal terms
useful life
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A quick definition of useful life:
Term: Useful life
Definition: Useful life refers to the amount of time that a piece of property can be used to generate income in a business or income-producing activity. This is an estimate of how long the property will be useful and productive before it needs to be replaced or retired. For example, a computer used in a business may have a useful life of five years before it becomes outdated and needs to be replaced.
A more thorough explanation:
Definition: Useful life refers to the estimated duration (in months or years) during which a depreciable asset is expected to be in use and generate income when utilized in a trade, business, or income-generating activity.
Example: A company purchases a delivery truck for $50,000. The estimated useful life of the truck is 5 years. After 5 years, the company expects to sell the truck for $10,000. Therefore, the company will depreciate the truck by $8,000 per year ($50,000 - $10,000 = $40,000 / 5 years = $8,000 per year).
Explanation: The example illustrates how useful life is used to calculate the depreciation of a depreciable asset. In this case, the useful life of the delivery truck is estimated to be 5 years, after which the company expects to sell it for $10,000. The company will then depreciate the truck by $8,000 per year over the 5-year useful life of the truck.