Depreciation is the accounting concept recognizing that physical assets lose value over time through wear, obsolescence, and aging. Rather than recording the entire cost of a road, building, or vehicle when purchased, depreciation spreads that cost over the asset's useful life. For example, a fire truck expected to last 15 years might be depreciated at one-fifteenth of its cost annually. This provides a more accurate picture of the true cost of delivering services each year. Municipal financial reporting uses depreciation to track the consumption of infrastructure assets and signal when replacement funding is needed. Accumulated depreciation—the total depreciation recorded since an asset was acquired—helps identify assets approaching the end of their useful lives. Understanding depreciation is essential for sustainable asset management and infrastructure planning.