Depreciation Definition

Depreciation describes the process of an asset become worth less and less over time. Many assets-from non-collectible cars to racehorses to computers-depreciate. Consider a typical personal computer system-when purchased it represents the height of modern technology, carries a warranty, and is loaded with gee-whiz software. Within a few years it’s little more than a giant paperweight. You may have spent $1,500 buying it, but after five years you’ll be lucky to sell it for more than $50-it’s depreciated. A lot.