Depreciation is a financial concept that refers to the gradual decrease in the value of an asset over time. This decrease in value is due to wear and tear, obsolescence, or other factors that affect the asset’s usefulness or marketability. Depreciation is an important consideration for businesses that own assets, as it affects their financial statements and tax liabilities. By accounting for depreciation, businesses can accurately reflect the true value of their assets and make informed decisions about when to replace or upgrade them. Depreciation can be calculated using a variety of methods, including straight-line, accelerated, and units-of-production. Each method has its own advantages and disadvantages, and businesses must choose the method that best suits their needs. Ultimately, depreciation is a critical component of financial management, and businesses must carefully consider its impact on their bottom line.
