What is Depreciation?

Legal Definition
In accountancy, depreciation refers to two aspects of the same concept:

  • The decrease in value of assets (fair value depreciation)
  • The allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle)

Depreciation is a method of reallocating the cost of a tangible asset over its useful life span of it being in motion. Businesses depreciate long-term assets for both tax and accounting purposes. The former affects the balance sheet of a business or entity, and the latter affects the net income that they report. Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. This expense is recognized by businesses for financial reporting and tax purposes. Methods of computing depreciation, and the periods over which assets are depreciated, may vary between asset types within the same business and may vary for tax purposes. These may be specified by law or accounting standards, which may vary by country. There are several standard methods of computing depreciation expense, including fixed percentage, straight line, and declining balance methods. Depreciation expense generally begins when the asset is placed in service. For example, a depreciation expense of 100 per year for five years may be recognized for an asset costing 500.
-- Wikipedia
Legal Definition
1) In the accounting context, the allocation of a physical asset's cost over its useful life.

2) The gradual loss in value of an asset.
Legal Definition
1.converting the cost of an asset into an operational cost over the lifetime. 2. a decline in market value of any asset. 3. a decrease in potential of an asset over lifetime. 4. reduction in currency value by government or floating exchange rate.