Definition of Depreciation





What is the definition of the term depreciation? What does the term depreciation mean?

Depreciation occurs when an asset drops in value over time. Deprecation is the opposite of the term appreciation, which is when an asset increases in value over time.

Depreciation definitionAssets can depreciate for a variety of reasons, with the most common reasons being age, "wear and tear" and obsolescence.

You may have heard somebody say, "as soon as you buy a car and drive it off of the lot, the car depreciates in value". This is true, because the second you start driving a car, the car starts incurring "wear and tear" and dropping in value. In addition, the older a car gets, the lower it tends to drop in value (this is obviously not always the case, eg classic cars)

Here are some examples of assets that depreciate in value:

-cars
-computers
-office furniture




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