Depreciation

The loss in value of a capital asset, due to wear and tear or obsolescence that cannot be compensated for by ordinary repairs. The purpose of the bookkeeping charge for depreciation is to write off the original cost of an asset (less expected salvage value) by equitably distributed charges against operations over its entire useful life. (When in any year more is charged on the books for depreciation than is reinvested in plant, the excess may be called “unexpended depreciation.”)