Definition of Land
The land that is used in a business (as opposed to land that is an investment, or land that will be sold by a real estate developer) is a tangible asset that is assumed to have an unlimited life. Therefore, the cost of the land is not depreciated.
Example of Land
Assume that a company purchases a warehouse for its business operations. The warehouse was built on a 10-acre parcel of land that is included in the property's cost of $1,600,000. A real estate appraisal indicates that the land has a current value of $400,000 and the warehouse building has a current value of $1,200,000.
The transaction will be recorded with a debit of $400,000 to the asset Land, and a debit of $1,200,000 to the asset Warehouse Building. The $400,000 allocated cost of the land is not depreciated, while the warehouse building's allocated costs of $1,200,000 will be depreciated over the warehouse building's years of useful life.