Definition Spreading the cost of a physical asset, such as a machine or vehicle, across the years it is used.
Example A €50k machine with a €5k residual value used for 5 years depreciates by €9k a year.
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Why it matters It spreads the cost of assets fairly and affects reported profit.
Where it is used Profit and loss statements, asset registers and CAPEX plans.
How to calculate it (Asset cost − residual value) ÷ useful life in years
Worked example A €50k machine with a €5k residual value used for 5 years depreciates by €9k a year.
