 Hello, in this lecture, we will define useful life. According to fundamental accounting principles, wild 22nd edition, the definition of useful life is length of time and asset will be productively used in operations of a business, also called service life or limited life. When we're thinking about useful life or typically thinking about property, plants and equipment, longer lived assets that will then be depreciated, useful life being part of that depreciation calculation. Let's take a look at an example. In this example, we have a tank which is property, plant and equipment. It's going to help us generate revenue in some way in the future. Therefore, we're going to put it on the books as an asset, a fixed asset, a depreciable asset that we will then depreciate over time. How are we going to depreciate that equipment? We're going to depreciate it according to its useful life. So in some format, at the end of the useful life, we want to bring the book value of this equipment down to what we believe the salvage value will be the amount that we can scrap the equipment for at the end of its useful life. For example, if we use a straight line method, we may do a calculation such as this, we have the cost of the equipment minus the salvage, the amount that we believe we can scrap or sell the equipment for at the end of the useful life, the life that we believe the equipment will be used to help us generate revenue, and that will give us the amount to be depreciated. Then we're going to say, well, how long are we going to have this equipment? That's the useful life. If we say we're going to have it for four years and then it'll be used up and we're going to sell it at that time at the salvage value, then a straight line method would be that we can divide by that four years and then depreciate it over that four years at an even depreciation rate of 59,375, meaning we're going to depreciate 59,375 four times over the four-year process, having total accumulated depreciation at the end of that time period of 237,500, and that means that the book value will leave us with the salvage value of 20,000 after the useful life has expired.