Depreciation

Depreciation is the accounting process of allocating the cost of a tangible asset over its useful life. It is used to account for declines in value due to wear and tear, deterioration, or obsolescence. This concept allows companies to earn revenue from an asset while expensing a portion of its cost each year the asset is in use, thereby matching expenses with revenues as per the matching principle in accounting. There are various methods of calculating depreciation, such as straight-line and accelerated depreciation, depending on the nature of the asset and the business's accounting policies.