Introduction of the term depreciation

Question

Provide a brief introduction of the term depreciation? Write down the causes of depreciation?

Answer 1

Depreciation is an everlasting, steady and continuous diminution in the book value of the fixed asset. Except Land all the fixed assets such as Machinery, Car, Furniture and so forth depreciates in value making the asset useless subsequent to the end of a certain time.

Subsequent are the reasons of Depreciation:

i) Wear and Tear because of regular employe of the asset.

ii) Deterioration takes place with the passage of time, whether the asset is in employ or not.

iii) Damages done to the assets due to a disaster like mishandling, fire and so on.

iv) Reduction of Asset.

v) Obsolescence that is, because of latest technology in employ, latest inventions, innovations and so on.