Depreciation
According to L.C Cropper “Depreciation is the diminish in the
financial assets of value owing to wear and tear, efflux, obsolesce or similar
reason.”
Depreciation is a process where
permanent continuously and gradually the book value of the fixed asset is
decreased over a period of time from one period to another period. The net
result of an asset’s depreciation is that sooner or later the book value of the
asset becomes zero.
The factors influencing the cause of
depreciation are
§ Wear and Tear due to actual use.
§ Efflux of Time which means merely passage of time will lead to fall
in the value of the asset.
§ Obsolescence
§ Accident
§ Fall in market price
Methods of Depreciation
Fixed Asset defers from one another in their nature very widely as
such no single depreciation can be applied to all types of fixed assets.
Different methods of depreciation are
required to be applied to different assets.
The important methods used in
calculating the depreciation are
1. Fixed Installment Method or Straight Line Method or Original Cost Method or Equal Installment Method
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