9. The economic function of depreciation can be
employed as a means of distributing the original
expense for a physical asset over the period during
which the asset is used.
10. Scrap or used
60% - 70% loss
31,000 $ 1,000 $
15 years
Depreciation = Original value – Current value
11. How engineers will see this?
• The original value is usually taken as the total
cost of the property at the time it is ready for
initial use.
• Depreciation period is ordinarily assumed to
be the length of property’s useful life.
Depreciation = 30,000 $
12. Depreciation is due to internal cause
It is charged against the profit of year
It is always decrease in value of asset
Market condition don’t affect depreciation because it is
permanent decrease
Types of Depreciation :
1. Physical depreciation
2. Functional depreciation
13. Decrease in value due to the
change in physical aspects of the property.
Wear and tear
Corrosion
Accidents
Deterioration
Wheather Effect
14. Depreciation due to all other changes
Obsolescence : caused by technological advances
Decrease in demand for the product involved
Shift of population center
Termination of need of asset
Abandonment of enterprise
Insufficient capacity for the service required
15.
16. 1. Depletion
2. Maintenance and Repair
3. Service Life
4. Salvage Value
5. Junk Value
6. Present Value
a) Book Value
b) Market Value
c) Replacement Value
17. Straight line Method
Sinking Fund Method
Declining Balance Method
Sum of the years Method
Accelerated Cost Recovery
System
M.Saqib
Hina Khushi
M.Talha
Anees-ur-Rehman
Ayesha Asif
