What is the primary purpose of accounting depreciation?

The primary purpose of accounting depreciation is to allocate the cost of an asset over its useful life. This method reflects how an asset's value decreases over time due to factors such as wear and tear, age, and obsolescence. By spreading the cost of the asset over the years it is utilized, businesses can match the expense of the asset with the revenue it generates, adhering to the matching principle in accounting. This provides a more accurate representation of a company's financial performance and position.

Acknowledging depreciation also helps stakeholders understand how much of the asset's cost has been recognized as an expense during a specific accounting period, which is essential for assessing the true profitability of the business. It also impacts financial statements and can affect financial ratios and analysis, giving a clearer picture of the company's operational efficiency.