Explanation
B: Depreciation
Depreciation refers to the reduction in the value of an asset over time due to wear and tear, obsolescence, or other factors. It is a measure of the decrease in an asset's value that occurs over time as it is used or becomes outdated.
Depreciation is commonly used in accounting to reflect the decrease in value of assets such as machinery, buildings, and vehicles. It is recorded as an expense on the income statement, which reduces the taxable income of a business.
Depreciation is calculated based on the useful life of an asset and the expected salvage value, which is the estimated value of the asset at the end of its useful life. The most common method used to calculate depreciation is the straight-line method, which involves dividing the cost of the asset by its useful life to determine the annual depreciation expense.
