Nov 8, 2025

Depreciation

• Depreciation in business is the process of spreading out the cost of a tangible asset

How do I remember it?

• Think of depreciation as your business slowly using up an expensive tool.

If you buy something big for your business, like a delivery van, you don’t “use up” its value all at once. Instead, you use it little by little every year.

Real world example

• Imagine your company buys a delivery van for $30,000, and you expect it to last 5 years before it’s worth $5,000 as scrap.

Cost: $30,000

Salvage value: $5,000

Useful life: 5 years

• You’d depreciate ($30,000 - $5,000) / 5 = $5,000 per year!