Calculate Depreciation Formula is a business term used to describe the accounting formula used to depreciate the cost of an asset over time. This depreciation formula helps businesses calculate the amount of value lost due to wear and tear on physical assets, such as machinery, buildings, or vehicles. By taking into account the annual utilization of an asset and its expected lifespan, companies are able to properly measure the decrease in value through depreciation. With the proper calculation of depreciation, businesses can accurately record their losses and structure their financial reporting accordingly.