The typical corporate equity amount consists of common stock, preferred stock and retained earnings. Depreciation is an important concept because it reflects how much of your assets have been used up. The typical balance sheet shows the cost of equipment when it is purchased. But as you know, just about everything looses value the older it is. Depreciation reduces the balance of the equipment to reflect the fact that it is loosing value each year.
Depreciation reduces the amount of money a company makes.