Depreciation (B) is the process of calculating how much an asset loses value over time due to wear, aging, or obsolescence.

Common depreciation methods include:

Straight-line depreciation

Declining balance depreciation

Why not other options?

(A) Payback period measures how long it takes to recover the initial investment, not asset value reduction.

(C) Diminishing return refers to economic output, not asset valuation.

(D) Life cycle cost considers total ownership costs, including maintenance and disposal.