Depreciation is an accounting method used to allocate the cost of a “tangible asset” over its useful life. It is a way to spread out the cost of purchasing and using an asset, such as a vehicle or building, over a period of time. By doing this, businesses can more accurately reflect their operational costs on their financial statements. In addition, depreciation allows businesses to take advantage of tax deductions for certain assets, making them more financially efficient. At the same time, by accurately representing the value of their tangible assets, businesses are better able to keep track of how those assets are being used and what they are contributing to the business.