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What Is Depreciation? Depreciation is a crucial accounting practice that spreads the cost of expensive assets , like equipment, across their useful life. Depreciation is thus the decrease in the value of assets and the method used to reallocate, or "write down" the cost of a tangible asset (such as equipment) over its useful life span. Businesses depreciate long-term assets for both accounting and tax purposes. Depreciation in accounting and bookkeeping is the process of allocating the cost of a fixed asset over the useful life of the asset . The cost of the asset should be deducted over the same period that the asset is used to generate income instead of deducting a large expense when it’s purchased. Depreciation is the term used to describe the slow decline in an asset's value over time, usually brought on by age, wear and tear, or obsolescence.
