The Internal Revenue Service defines a business expense as ‘ordinary’ and ‘necessary’. Ordinary expenses are those costs typically incurred in your industry. A restaurant would not ordinarily purchase vaccines. And a medical practice would not purchase 50 heads of lettuce.
What is Depreciation?
Depreciation is a principle used in accounting to match revenues with the associated costs to produce that revenue. Often the business operation has to purchase some large piece of equipment to make, store or deliver the asset to the customer. This asset will be used many times over in future sales. Depreciation is a calculation of small percentage of the original price as an expense in the current accounting cycle matching costs to the revenue generated in the accounting period.