Depreciation is an accounting method used to systematically spread out the cost of an asset over its expected lifespan. It allows businesses to deduct a portion of the purchase price of fixed assets against their income each year to reduce their tax burden. By calculating depreciation, businesses can recoup some of their upfront expenses while capturing changes in the market value of their investments over time. By using specific methods of calculating depreciation, businesses can accurately determine the impact of such purchases on their bottom line.