"Depreciation expense is the portion of a fixed asset cost that is being used up during the current period. When a fixed asset is purchased, the cost is capitalized on the balance sheet. Each period, depreciation expense is recognized which reduces the asset balance. While there are many ways to depreciate an asset, most companies use the straight-line method of depreciation."

A depreciation expense is the cost of an asset over time and is a calculation that helps businesses determine and forecast financial status for budgeting purposes. Depreciation expense is recognized on the income statement as a non-cash expense that reduces the company's net income. For accounting purposes, the depreciation expense is debited, and the accumulated depreciation is credited. It is considered a non-cash expense because the recurring monthly depreciation entry does not involve a cash transaction.