2. -Meaning
-Depreciable assets
-Factors causing depreciation
-The need and objective of providing depreciation
-Basics factor to be known before calculating depreciation
-Methods of depreciation
-Straight line method &written down value method
3. Meaning-
Depreciation may be described as
a permanent, continuing and
gradual shrinkage in the value of fixed
assets. It is a fall in the quality, or value of
fixed asset. The net result of an
depreciation is that sooner or later the
asset will become useless.
4. 1. Used during more than one year
2. Have a limited useful life
3. Are held by an enterprise for use in :
-the production or supply of goods and
services
-for renting to others
-for administrative purposes
-not for the purpose sale in the
ordinary course of business.
5. 1. Wear and tear due to actual use
2. Efflux of time
3. Obsolescence
4. Accident
5. Fall in market price
6. 1. Depreciation means expiration of the
cost of the fixed asset, concerned
during the period for which accounts
are being prepared.
2. To continue to show the fixed assets at
their original worth in the balance sheet.
3. The amount debited in the profit and
loss a/c are retained in the business.
7. 1. Cost of the assets
2. The estimated residual or scrap value at
the end of it’s life
3. The estimated numbers of the years of
it’s life
8. 1. Straight line method
2. Written down value method
3. Annuity method
4. Insurance fund method
5. Depreciation fund method
6. Sum of digits method
7. Revaluation method
8. Depletion method
9. Machine hour rate method
10. Repair provision method
9. This method is based on the assumption
of equal usage of the asset over it’s
entire useful life. It is also called fixed
installment method because the amount
of depreciation remains constant from
year to year over the useful life of the
asset. According to the method ,a fixed
and an equal amount is changed as
depreciation in the every accounting
period during the lifetime of an asset.
11. Under this method, depreciation is
charged on the book value of the asset.
Since book value keeps on reducing by
the annual charge of depreciation, it is
also known as reducing balance
method. The amount of depreciation
reduce year after year.
