Annual Depreciation Expense is a key concept in business accounting that measures the decrease in an asset’s value over time. It represents businesses’ investment in non-monetary assets such as buildings, equipment, and tools and allows companies to spread out the cost of these investments over multiple years. In essence, a company’s depreciation expense represents the amount it must allocate each year for the eventual replacement of its assets. The depreciation expense can be found on a company’s balance sheet and income statement and significantly influences a business’ profitability.