Meaning of Depreciation Account - SS1 Accounting Lesson Note

Depreciation account is a financial record that shows the decrease in value of a tangible asset over time.

When a company purchases a long-term asset such as a building, equipment, or machinery, the value of the asset is spread out over its useful life. Each year, a portion of the asset's value is considered to have been "used up" or "consumed" in the production of goods or services, and this decrease in value is recorded as an expense in the depreciation account. 

By recognizing this expense over time, the depreciation account helps to accurately reflect the true cost of using the asset and reduces the potential for a large, one-time expense when the asset is eventually replaced. The depreciation expense is also important for calculating the company's net income and tax liability.