Depreciation Expenses
Depreciation expenses refer to the allocation of the cost of a tangible asset over its useful life. This accounting method recognizes the gradual reduction in value of the asset as it is used for generating revenue. Depreciation expenses are recorded on the income statement to reflect the wear and tear of assets such as machinery, equipment, buildings, and vehicles. This process allows businesses to match the cost of using assets with the revenue they generate, providing a more accurate representation of profitability.