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Depreciation

UK //dɪˌpriː.ʃiˈeɪ.ʃən// US //dɪˌpriːʃiˈeɪʃən// Pronunciation

Definition

A reduction in the value of an asset over time, in accounting and finance.

Listen to definition

In simple words: The decrease in value of something over time.

Examples

• The depreciation of the car’s value was calculated at $2,000 per year.
• Investors need to consider depreciation when assessing asset performance.
• Depreciation affects tax deductions for businesses.
• In real estate, depreciation can impact property taxes significantly.
• The company recorded depreciation on its machinery to reflect its aging.

Usage notes

Used mainly in finance and accounting contexts. Not typical in casual conversation. Important in discussing asset valuation and taxes.

Grammar pattern

standalone noun

Memory hint

Think of 'depreciation' as 'decreasing price' - both start with 'de'.

Collocations

• calculate depreciation
• annual depreciation
• depreciation expense
• depreciation schedule
• depreciation allowance

Synonyms

• devaluation
• diminution
• decline
• reduction
• loss

Common mistakes

• Confused with 'devaluation', which refers to a decrease in value due to changes in currency.
• Misused in non-financial contexts, as 'depreciation' primarily applies to tangible assets.
• Incorrectly used as both a noun and a verb; it's only a noun.