Depreciation on the whole, is stated to represent the attempt to allocate an assets initial cost over its useful lifecycle. Financial managers attempt to match annual expenses of plant and equipment ownership against produced revenues.
A corporation may purchase a fleet of vehicles for business use. Over a number of year, the vehicles would depreciate in value and this loss must be accounted for in the company's financial statements. In reflecting this loss, the company gives shareholders an accurate portrayal of the economic health of the business. Accumulated may be reflected on a sheet as plant, vehicles, equipment, etc.
On the books, depreciation attempts to match up profits for the expenses used to generate the profit. On the statement of cash flows, depreciation expense is recorded to allocate loss in value over time. This is an entry on the books to keep the records within financial reality. Unlike other expenses that may be recorded, depreciation expense is a "non-cash" charge entry.
This means that no physical money was actually paid at the time that the expense is incurred. Depreciation expense is important to record as one would not want to overvalue a company without knowing the real numbers involved.
Depreciation expense is also deductable with regard to taxes and will benefit a company by being recorded in their books. Having the books correctly stating depreciation expenses could defray tax burden over substantial periods of time leaving more funds available for the company to use for maximizing shareholder wealth.