Depreciation
Depreciation is the loss of value of an item over time. A new car or phone is usually worth less each year because of wear, age, and newer models.
Businesses also record depreciation as an expense that reduces the book value of equipment and buildings on the balance sheet. A business spreads the cost of equipment or a building over the years it uses the asset. That expense lowers the book value and is not cash paid out that year, so it is added back when measuring cash from operations. Patents and other intangibles use amortization instead.
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