4. DEFINITIONs OF DEPRECIATION
Spicer and Pegler defines
depreciation as “the measure of
exhaustion of the effective life of an
asset from any cause during a period.
According to Pickles, depreciation is
“the permanent and continuing
diminution in the quality, quantity or
value of a fixed asset.
5. CAUSES OR FACTORS OF DEPRECIATION
1. WEAR AND TEAR
Constant use of assets result in wear and
tear especially in case of plant and machinery,
furniture and fixtures, motor vehicles etc.
6. 2.OBSOLESCENCE
As a result of change in fashion or
new inventions, some assets may
be discarded before their
productive life comes to an end.
This is called obsolescence.
7. 3.PASSAGE OF TIME
Some assets decrease in value
merely because of passage of
time. For instance, a car
purchased last year will not have
the same value even though it
was not put to use even for a
single day.
8. 4.DEPLETION
Some assets are of wasting
character due to constant
extraction of raw materials.
Natural resources such as
mines quarries and oil wells
come under this category.