Definition
The systematic allocation of a tangible long-term asset's cost over its useful life. Depreciation is an expense that reduces net income and the book value of the asset each period.
Formula
Straight-Line: Annual Depreciation = (Cost − Salvage Value) ÷ Useful Life
Example
Equipment costs $50,000, salvage value $5,000, life 5 years → Annual depreciation = $9,000.