What typically causes 'depreciation' in accounting?

Depreciation in accounting refers to the systematic allocation of the cost of tangible assets over their useful lives. The primary cause of this decline in asset value is the wear and tear that occurs as these assets are used over time. As tangible assets, such as machinery, vehicles, or buildings, age and are subjected to usage, they become less efficient and lose value. This decline is recognized in financial statements to reflect the asset's current worth and to allocate the cost appropriately against the revenues generated from using the asset during its operational life.

This approach provides a more accurate depiction of the company's financial position by matching expenses with the revenue they generate, adhering to the matching principle in accounting. Recognizing depreciation helps businesses understand the long-term viability of their investments and allows for better planning concerning asset replacement and maintenance.