Final answer:
Accounting for depreciation recognizes the decrease in value of an asset over its life. It involves recording depreciation expenses on financial statements, affecting the asset's net book value and reducing taxable income.
Step-by-step explanation:
The process of accounting for depreciation can be best described by recognizing the decrease in value of an asset over time. Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life. Businesses use this process to account for the wear and tear, deterioration, or obsolescence of assets. Depreciation expenses are recorded in the financial statements, which affect the net book value of assets on the balance sheet and reduce taxable income on the income statement.
For example, if a company purchases a piece of equipment for $100,000 with an expected lifespan of 10 years, the company might use straight-line depreciation to expense $10,000 each year for 10 years. This accounting entry would reflect the asset's consumption and the reduction of its value over time.