Depreciation

Formal

A decrease in the value of asset caused by wear-and-tear, technological obsolescence or time. The allowance or charge made to a company’s profit and loss account, to reflect this change in value.

Real-world Example

A company buys a delivery van for $40,000 with an expected 5-year useful life. It depreciates the van by $8,000 a year, spreading the cost across the years it's actually used rather than expensing it all at once.