Depreciation is a process by which the value of something is gradually reduced. It’s often used for assets, like cars and houses, that wear out over time due to regular use. Or The decline in the value of an asset due to wear and tear and obsolescence.

There are two ways of calculating depreciation: straight-line depreciation, where the value is reduced by an equal amount on a fixed schedule each year; and double-declining balance depreciation, where the annual reduction is calculated by applying half the calculated annual percentage rate to the original cost of the asset.