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Depreciation, in general conversation, is the decline in value of an asset due to wear and tear, becoming outdated, or actual destruction.  Cars, homes, computers, factories, and all types of equipment undergo depreciation.

'''Depreciation''', in general conversation, is the decline in value of an asset due to wear and tear, becoming outdated, or actual destruction.  Cars, homes, computers, factories, and all types of equipment undergo depreciation.

In accounting, depreciation is not an attempt to value an asset, but rather to allocate its cost over a period of time.  The basic formula for depreciation is Cost minus salvage value, the result of which is divided by service life.  While there are many different ways to calculate depreciation, the easiest to understand is straight line.

In accounting, depreciation is not an attempt to value an asset, but rather to allocate its cost over a period of time.  The basic formula for depreciation is Cost minus salvage value, the result of which is divided by service life.  While there are many different ways to calculate depreciation, the easiest to understand is straight line.