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Depreciation takes into account the decrease in the service potential of capital assets invested in a business venture, resulting from such causes as physical wear and tear in ordinary use, deterioration by natural elements or obsolescence caused by technological changes. Basically depreciation is a loss in value or a diminishment in market price of a good always taking the time factor into account. Depreciation is a rate of change in value in an asset fixed or current compared to the present value of that asset.
For example if a company purchases machinery for the production of a certain product the management must take under consideration the equipment's life cycle, meaning that this machinery has a certain period of time in which it can contribute to the production before it becomes useless...
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