What is 'Depreciation'?

Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account for declines in value over time ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

| Term of the Day Depreciation Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account for declines in value. Businesses depreciate long-term assets for both tax and accounting purposes. For tax purposes, businesses can deduct the cost of the tangible assets they purchase as business expenses; however, businesses must depreciate these assets according to IRS rules about how and when the company can take the deduction. Read More » Related to "Depreciation" Understanding Methods and Assumptions of Depreciation Examine how methods and assumptions in depreciation impact the value of long-term assets and how these factors can affect short-term earnings results. Read More » Amortization vs. Depreciation: What's the Difference? Learn the difference between amortization and depreciation and how companies use these accounting methods to their advantage when they must declare the value of assets in their possession. Read More » How Are Accumulated Depreciation and Depreciation Expense Related? Understand the relationship between accumulated depreciation and depreciation expense and learn how each is accounted for on financial statements. Read More » Related Definitions Sum-Of-The-Years' Digits Sum-of-the-years'-digits is an accelerated method for calculating an asset's depreciation. Read More » Economic Depreciation Economic depreciation is a measure of the decrease in the market value of an asset over time from influential economic factors. Read More » Internal Revenue Service (IRS) The Internal Revenue Service (IRS) is the U.S. federal agency that oversees the collection of taxes—primarily income taxes—and the enforcement of tax laws. Read More » Deduction A deduction is any item or expenditure subtracted from gross income to reduce the amount of income subject to tax. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC, All Rights Reserved | Privacy Policy