Depreciation

Spreading the cost of a long-lived asset across the years it is used, rather than expensing it all at once.

Example

A £3,000 laptop expected to last three years is recorded as £1,000 of cost per year.

It is a non-cash expense: it reduces profit without money leaving the bank, which is one of the main reasons profit and cash differ.

Income statement (P&L) — A statement of revenue, costs and profit over a period. Revenue − COGS = gross profit; gross profit − OpEx = operating profit.
Balance sheet — A snapshot at one moment of what you own (assets), what you owe (liabilities), and the difference (equity).
Cash flow — The actual movement of money in and out of your bank account, as distinct from revenue you have earned but not been paid.
EBITDA — Earnings before interest, tax, depreciation and amortisation — a rough proxy for operating profitability.