Final answer:
Depreciation is the allocation of the cost of a tangible asset over its useful life, expressed as an expense on the income statement, to match revenue generated. This method reflects the asset's economic value while in use. Collectibles, which may appreciate over time, do not typically offer high returns in the long run.
Step-by-step explanation:
The process of allocating the cost of a long-lived, tangible asset over its useful life to create an expense on the income statement, which is matched against the revenue generated by using the asset, is known as depreciation. This accounting practice spreads the cost of the asset over the time it is expected to generate revenue, which helps in reflecting the true economic value of the asset while it is in use. For example, when a company purchases a piece of machinery, the total cost of the machinery is not expensed in the year of purchase, rather it is depreciated over the machinery's useful life. Fixed costs, such as rent, do not change in the short run and are not a part of depreciation. On the other hand, collectibles, such as paintings and jewelry, may not be depreciated as they can sometimes increase in value and can provide both service returns and potential higher future selling prices, but they do not typically generate a higher-than-average rate of return over time.