Depreciation is an accounting term that describes the reduction of the value of an asset over time. The depreciation method refers to how this devaluation is calculated. Companies must choose one of four methods: straight-line, double declining balance, units of production, or sum of the years digits. Whichever method they use will affect their bottom line; they need to make sure they’re selecting the best approach for their business goals. Depreciation gives businesses a way to spread costs out over the useful life of assets like buildings, machinery, and vehicles. By allocating their expenses through depreciation, companies avoid having to pay hefty sums in one go.