Definition of "Depreciation"

The decline in the value of an asset or investment.

A bookkeeping entry that does not require cash outlay nor funds to be earmarked. The entry is a charge against earnings to write off the cost of an asset over its assessed useful life over a set time period. It reduces taxable income but does not reduce cash. The most commonly used depreciation methods are Straight-line Depreciation and Accelerated Cost Recovery System (ACRS).