Depreciation

Definition

The systematic expensing of a tangible asset's cost (minus salvage value) over its useful life. A non-cash expense: cash left at purchase; depreciation spreads the P&L impact.

Formula

Straight-line: Annual depreciation = (Cost - Salvage) / Useful life

Worked Example

Server: cost $9,600, life 4 years, salvage $600.

Annual  = ($9,600 - $600) / 4 = $2,250
Monthly = $187.50

Year   Depreciation   Accumulated   Book Value
 0          -              -          $9,600
 1        $2,250        $2,250        $7,350
 2        $2,250        $4,500        $5,100
 3        $2,250        $6,750        $2,850
 4        $2,250        $9,000          $600   <- salvage

Interpretation & Pitfalls

If your product runs on owned hardware, per-unit COGS must include depreciation or your margin is fiction.

In TupicFinance

Depreciation entries post as cost items in their own category and flow into Cost of Sales breakdowns alongside cash costs.