Depreciation

Ron explains in 60-seconds with no BS

So what is depreciation, really?

Depreciation is how businesses deal with two realities at once…

  1. First, it doesn’t make sense to count the full cost of big purchases all at once. Instead, depreciation spreads out the cost of long-term assets like computers, vehicles, or equipment, over the years those assets are used to generate income. So depreciation lets us match those expenses to the time they’re actually helping your business make money.

  2. Also, depreciation helps us reflect how those big assets lose their value over time, even if they’re still functional.

But on top of all of that, depreciation isn’t just about wear and tear. It’s also a smart tax strategy and a core part of business accounting. Because that $5,000 printer? It’s technically worth less the second you hit “print.”

Depreciation is your accountant saying, ‘Don’t worry, we’ll write record that purchase onto the books… but we’re going to do it very slowly.’

How people actually use it in a sentence...

“Janelle was still using the same laptop from 2019… But according to her Balance Sheet, it became worthless 3 years ago.”

Did you know...

The IRS made depreciation a formal tax tool during World War II to encourage companies to invest in equipment without crushing their finances. It became a way to match long-term costs with long-term income.

Today, it’s one of the best tools for business owners who want their expenses — and their taxes — to make sense.