There are many assets that last longer than a year, such as buildings, machinery, equipment, furniture, computers, vehicles
As the assets are used, we must recognize the associated cost
Depreciation is the portion of the cost of the asset that is used up in an accounting period
In other words, depreciation is the transfer of a portion of the asset’s cost from the balance sheet to an expense on the income statement during each accounting period
Qs: Have you heard the term depreciation before?