Glossary

Depreciation is the decrease in the value of a physical asset, like equipment or a building, over time due to wear and tear, age, or obsolescence. 📉 In accounting, depreciation allows businesses to spread out the cost of an asset over its useful life, which helps them allocate expenses more evenly and better assess their financial performance.

For example, if a company buys a $10,000 machine with a useful life of 10 years, it may depreciate the machine by $1,000 per year, spreading the cost over a decade. ⚙️

Fun fact: Did you know that not all assets depreciate? Land, for example, doesn't wear out or become obsolete, so it's not subject to depreciation. In fact, land values can sometimes appreciate over time! 🌱