The decline in value of a business asset. Lets say a coffee shop acquires a $20,000 coffee machine which is deemed to have a useful life of 10 years. Using straight line depreciation, the coffee shop would recognise a $2000.00 depreciation charge per year on its P&L until the asset was fully depreciated. Depreciation applies to Tanglible Assets (actual things) that have a decline in value over time.

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