depreciation

An accounting method used by corporations to allocate the cost of capital investments that have long life-spans, such as buildings and machinery. The goal of depreciation is to spread recognition of the expense over the lengthy life-span of a building or machine, as opposed to recording a large, one-time hit to income when the cash is actually used to pay for the item. Depreciation also factors in the likelihood that the property may have a final salvage value. Depreciation is a noncash expense that reduces the value of a capital (fixed) asset listed on the balance sheet.