Meaning And Methods Of Depreciation
Depreciation is the diminution in the value of assets due to use, wear and tear and efflux of time. It is an estimated charge against profit for use of fixed assets. The provision for depreciation is to create funds for replacement of assets. There are various method of depreciation, such as,–
Methods of Calculating Depreciation
There are a number of methods of calculating depreciation on the original cost or on the replacement cost of the assets. Each method adopts one or more of the following principles —
Whatever method is applied in the accounts, it must be suitable to the circumstances prevailing in the organisation. The following should be noted for depreciation of the following types of fixed assets:–
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