Depreciation refers to the decrease in the value of an asset due to use and over time as a result of wear and tear or being outdated. It is a commonly used term in accounting as well as insurance, where depreciation is considered when calculating the value of assets like machinery, vehicles and more in one year. 

For instance, if a firm purchases a commercial pizza oven worth ₹1.50 lacs and have depreciation of 10% for next 5 years. The depreciated amount for the oven will be ₹15,000.

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