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Accounting · Definition

Depreciation

Spreading the cost of a fixed asset across its useful life.

Depreciation charges a portion of an asset’s cost to each period it is used, rather than expensing the whole amount on purchase. Straight-line spreads it evenly; reducing-balance front-loads it.

It matters operationally because it depends on the asset register being right — assets still being depreciated after disposal, or missing entirely, quietly distort both profit and asset value.

How it is calculated

Straight-line depreciation = (Cost − Residual value) ÷ Useful life

Amortisation is the same idea applied to intangible assets.

Also called

  • amortisation

Related terms

Fixed Asset Register

The authoritative list of capital assets with cost, location and depreciation.

Hurdle Rate

The minimum return a proposed investment must clear to be approved.

Balance Sheet

A snapshot of what the business owns and owes at a point in time.

Total Cost of Ownership

TCO

The full lifetime cost of a purchase, not just its price.

More in Accounting

Accounts Payable (AP) Accounts Receivable (AR) Accrual Accounting Accrued Expense Aging Report Bad Debt Provision Bank Reconciliation Break-Even Point

Depreciation is not just a definition here

Accounting runs on this vocabulary every day in AWRA OpsHub — 51 of our 257 glossary terms describe things the platform actually does.

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