What is the depreciation of capital equipment?

Depreciation of capital equipment refers to the gradual reduction in its value over time due to wear and tear, obsolescence, or usage. This accounting method allocates the cost of the equipment over its useful life, reflecting its decreasing value on financial statements. Businesses use various methods, such as straight-line or declining balance, to calculate depreciation, impacting tax liabilities and financial planning. Ultimately, depreciation helps provide a more accurate picture of a company's financial health by accounting for asset value loss.