Depreciation

Definition

The systematic allocation of a long-term asset's cost over its useful life. It's not about the asset losing value—it's about matching expense with the revenue the asset helps generate.

Related Terms

Accumulated Depreciation

A running total of all depreciation expense ever recorded on a long-term asset. It's a contra-asset account—meaning it reduces the asset's value on the balance sheet. Think of it as wear-and-tear mileage that accumulates over the asset's life.

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