This document discusses depreciation, which is the reduction in value of an asset over time due to wear and tear, damage, or obsolescence. It defines depreciation and explains that it is allocated over the expected useful life of the asset. The objectives of depreciation are to ascertain the correct cost of production, show a true financial position, and ascertain the correct profit and loss. Causes of depreciation include effluxion of time, accidents, wear and tear, and obsolescence. The document then describes the straight-line and diminishing balance methods of calculating depreciation and compares their merits and demerits.