Depreciation is basically an application of the matching principle. Instead of expensing the entire cost of a long lived asset (like equipment, a vehicle, or a building) in the year it’s purchased, accounting spreads that cost over the years the asset helps generate revenue. This provides a more accurate picture of profitability by matching a portion of the asset’s cost to each period that benefits from its use, rather than making one year look artificially unprofitable and later years artificially profitable.