Depreciation
Financial Accounting glossary · Assets: Cash, Receivables, Inventory, PP&E & Intangibles
Definition
Systematic allocation of a tangible long-lived asset's cost over its useful life.
Depreciation in plain English
Imagine you buy a delivery van for $30,000. It doesn't magically become worthless the day it stops running — it slowly wears out over the years you use it. Depreciation is accounting's way of spreading that $30,000 cost across all the years the van actually helps you make money, instead of dumping the whole expense in year one. "Tangible long-lived asset" just means a physical thing you'll use for many years (a van, machine, or building), and "useful life" is how long you expect to use it. So each year you record a slice of the cost as an expense, matching what the asset gave you that year.
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