What is Depreciation?
Depreciation is used to record the cost of an asset (business equipment) and the loss of its value. This is calculated over its expected lifetime. These items are your physical assets, computers, printers, cars, machinery etc, they all lose value over time. The loss of value is called depreciation. Assets depreciate for many reasons, everyday wear and tear, down payments, current trade-in value, and outstanding fees etc. Depreciation allows your business to record the expense in increments rather than deducting the total cost of the purchase immediately which can impact a business’s profit. This also allows the business to still generate revenue from it.