Depreciation is an accounting method used to allocate the cost of tangible assets over their useful lives. It represents the gradual decrease in the value of assets due to factors such as wear and tear, obsolescence, or decay. Depreciation expense is recorded on the income statement and reduces the reported net income, reflecting the consumption of asset value over time. Various depreciation methods, such as straight-line depreciation, accelerated depreciation, and units of production depreciation, are used to allocate asset costs systematically and comply with accounting principles and tax regulations. Depreciation is essential for accurately matching expenses with revenue and determining the true economic cost of using assets for business operations. It also affects financial metrics such as profitability, asset turnover, and tax liabilities.