Fixed assets are possessions of a business with a useful life longer than one year and which could be used within the production or supply of goods or services. Examples include equipment, buildings and land. Depreciation is the process of allocating the cost of an asset over its useful life, spreading the expense evenly over that period of time. This allows companies to recoup the costs associated with acquiring the asset in a systematic way. As depreciation is applied, fixed assets such as equipment become less valuable on the company’s balance sheet, resulting in reduced taxable income and a tax advantage for the company.