depreciation calculation

Depreciation is the process of spreading out the cost of an asset, like equipment or a vehicle, over its useful life. Instead of recording the full expense at once, businesses allocate a portion of the asset’s cost each year to reflect its decrease in value as it gets used over time. This helps accurately match expenses with the periods they benefit. Common methods include straight-line (equal amounts each year) or declining balance (larger depreciation early on). Depreciation allows companies to account for wear and tear, obsolescence, and aging of assets in their financial statements.