Depreciation is a method of accounting for measuring and distributing the cost of an asset over its useful life. Depreciation refers to the loss of an asset’s value as it ages and can only be applied to tangible assets that are quantifiably measurable. Any asset with a decreasing value is subject to the depreciation convention, which means that an accountant can divide the total cost of the asset and assign the increments to future write-offs.
A broader definition of depreciation includes a simple decrease in market value over time, which is typically applied to property, home, or vehicle depreciation.
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