Chapter 2: Depreciation

"Depreciation maybe defined as a measure of the exhaustion of the effective life of an asset, due to any cause, during a given period."


Different kinds of fixed tangible assets such as machines, furniture, building, vehicles, computer etc. are used in trade and business. Each asset has its own useful life. This life can be defined as the time period for which the asset can be used. Due to the use of an asset, its efficiency decreases. The value of asset also decreases due to natural/physical factors, due to passing of time. Sometimes, despite having a good physical condition, the use of old assets becomes expensive due to the emergence of new and more efficient assets. Due to these reasons, the life of asset becomes finite (limited). Owing to any of these reasons, the efficiency of an asset constantly decreases and consequently the value also decreases. This is termed as depreciation.
In this course:
+ Introduction
+ Meaning and definition of Depreciation
+ Characteristics of Depreciation
+ Objectives of Provision for Depreciation
+ Factors affecting Depreciation
+ Factors to be considered while determining amount and rate of depreciation
+ Depreciable assets
+ Methods of Depreciation
+ Difference between straight line method and reducing balance method
+ Methods of recording depreciation
+ Typical Illustrations


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