Depreciation refers to the reduction in the value of an asset over time due to factors such as usage, wear and tear, or obsolescence. It is a key concept in accounting, used to allocate the cost of a tangible asset over its useful life.
| Concept | Description |
| Definition | Loss of value of an asset over time. |
| Purpose | To reflect the true value of assets on financial statements. |
| Methods | Straight-line, declining balance, units of production. |
| Useful Life | Estimated period over which an asset will be used. |
| Salvage Value | Estimated value of an asset at the end of its useful life. |
| Impact | Affects net income and asset value on the balance sheet. |
Understanding depreciation helps businesses make informed decisions about asset management and financial planning.
