What is depreciation?

Depreciation is the gradual allocation of a tangible asset's cost over its useful life. It helps businesses match the cost of long-term assets, such as equipment and vehicles, to the periods in which they are used.

Example: A company purchases a $24,000 delivery vehicle and records depreciation expense over several years instead of recognizing the full cost immediately.

Related terms: Amortization, Fixed Assets, Expenses, Balance Sheet