Depreciation affects a company’s financial statements by gradually reducing the book value of assets over time, reflecting their wear and tear or obsolescence. This non-cash expense lowers net income on the income statement while accumulating on the balance sheet as a contra asset. It helps present a more accurate financial position by matching expenses with revenue. Companies use different methods like straight-line or declining balance to calculate it. According to online class help reviews, understanding depreciation is crucial for accounting students learning accurate financial reporting.